ICE Futures U.S., Inc. – s. 144 of the OSA and ss. 38, 78 of the CFA
Headnote
Section 78 of the Commodity Futures Act (Ontario) and section 147 of the Securities Act (Ontario) -- Application for an order varying an existing order to allow ICE Futures US Inc. to offer direct trading access to participants located in Ontario that have obtained an exemption from the requirement to be registered under section 22 of the Commodity Futures Act -- requested order granted.
Applicable Legislative Provisions
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 15, 78.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21, 147.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED
(the OSA)
AND
IN THE MATTER OF
THE COMMODITY FUTURES ACT, R.S.O. 1990,
CHAPTER C.20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
ICE FUTURES U.S., INC.
ORDER
(Section 144 of the OSA and sections 38 and 78 of the CFA)
WHEREAS the Ontario Securities Commission (Commission) issued an order dated September 1, 2009 (Exemption Order) exempting ICE Futures U.S., Inc. (ICE Futures U.S.) from the requirement to be recognized as a stock exchange under Section 21 of the OSA and the requirement to be registered as a commodity futures exchange under Section 15 of the CFA (Exchange Relief);
AND WHEREAS the Exemption Order also exempts trades in ICE Futures U.S. Contracts (as defined below) by a "hedger" as defined in subsection 1(1) of the CFA (Hedger) from the registration requirement under Section 22 of the CFA (Hedger Relief);
AND WHEREAS, on March 11, 2021, the Commission varied the Exemption Order as part of a broader order to streamline the regulatory reporting requirements applicable to foreign commodity futures exchanges, multilateral trading facilities, and swap execution facilities carrying on business in Ontario and reduce regulatory burden (Revised Exemption Order);
AND WHEREAS ICE Futures U.S. (or the "Applicant") has applied for an order pursuant to section 38 of the CFA exempting trades in ICE Futures U.S. Contracts by a bank listed in Schedule I to the Bank Act (Canada) (Bank) entering orders as principal and only for its own account from the registration requirement under section 22 of the CFA (Bank Relief);
AND WHEREAS ICE Futures U.S. has applied for an order pursuant to section 38 of the CFA exempting trades in ICE Futures U.S. Contracts by an Ontario Participant (as defined in the Exemption Order) that is not a dealer, a Hedger, or a Bank, but has obtained an exemption from the registration requirement under section 22 of the CFA (Participant Relief and, together with the Hedger Relief and the Bank Relief, Registration Relief);
AND WHEREAS ICE Futures U.S. has also filed an application under section 144 of the OSA and under section 78 of the CFA requesting that the Commission issue an order varying the Revised Exemption Order to grant the Bank Relief and the Participant Relief;
AND WHEREAS ICE Futures U.S. has filed an application under section 144 of the OSA and under section 78 of the CFA requesting that the Commission issue an order to extend the term of the Revised Exemption Order and prospective Bank Relief and Participant Relief indefinitely (together with the Bank Relief and Participant Relief applications, the Application);
AND WHEREAS, based on the Application and the representations made to the Commission by the ICE Futures U.S., the Commission has determined that it is not prejudicial to the public interest to vary the Revised Exemption Order by granting the Bank Relief and the Participant Relief and extending the term of such indefinitely;
IT IS ORDERED, pursuant to section 144 of the OSA and Sections 38 and 78 of the CFA, that the Revised Exemption Order is varied and restated as follows:
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED
(the OSA)
AND
IN THE MATTER OF
THE COMMODITY FUTURES ACT, R.S.O. 1990,
CHAPTER C.20, AS AMENDED
(the CFA)
AND
IN THE MATTER OF
ICE FUTURES U.S., INC.
ORDER
(Section 147 of the OSA and sections 38 and 80 of the CFA)
WHEREAS the Ontario Securities Commission (Commission) issued an order dated September 1, 2009 (Exemption Order) exempting ICE Futures U.S., Inc. (ICE Futures U.S.) from the requirement to be recognized as a stock exchange under Section 21 of the OSA and the requirement to be registered as a commodity futures exchange under Section 15 of the CFA (Exchange Relief);
AND WHEREAS the Exemption Order also exempts trades in ICE Futures U.S. Contracts (as defined below) by a "hedger" as defined in subsection 1(1) of the CFA (Hedger) from the registration requirement under Section 22 of the CFA (Hedger Relief);
AND WHEREAS, on March 11, 2021, the Commission varied the Exemption Order as part of a broader order to streamline the regulatory reporting requirements applicable to foreign commodity futures exchanges, multilateral trading facilities, and swap execution facilities carrying on business in Ontario and reduce regulatory burden (Revised Exemption Order);
AND WHEREAS ICE Futures U.S. has applied for an order pursuant to section 38 of the CFA exempting trades in ICE Futures U.S. Contracts by a bank listed in Schedule I to the Bank Act (Canada) (Bank) entering orders as principal and only for its own account from the registration requirement under section 22 of the CFA (Bank Relief);
AND WHEREAS ICE Futures U.S. has applied for an order pursuant to section 38 of the CFA exempting trades in ICE Futures U.S. Contracts by an Ontario Participant (as defined in the Exemption Order) that is not a dealer, a Hedger, or a Bank, but has obtained an exemption from the requirement to be registered under the CFA from the registration requirement under section 22 of the CFA (Participant Relief and, together with the Hedger Relief and the Bank Relief, Registration Relief);
AND WHEREAS ICE Futures U.S. has also filed an application under section 144 of the OSA and under section 78 of the CFA requesting that the Commission issue an order varying the Revised Exemption Order to grant the Bank Relief and the Participant Relief;
AND WHEREAS ICE Futures U.S. has filed an application under section 144 of the OSA and under section 78 of the CFA requesting that the Commission issue an order to extend the term of the Revised Exemption Order, the Bank Relief, and the Participant Relief indefinitely (together with the Bank Relief and Participant Relief applications, the Application);
AND WHEREAS OSC Rule 91-503 Trades in Commodity Futures Contracts and Commodity Futures Options Entered into on Commodity Futures Exchanges Situate Outside of Ontario (Rule 91-503) exempts trades of commodity futures contracts or commodity futures options made on commodity futures exchanges not registered with or recognized by the Commission under the CFA from sections 25 and 53 of the OSA;
AND WHEREAS the deemed rule titled In the Matter of Trading in Commodity Futures Contracts and Commodity Futures Options Entered into on Commodity Futures Exchanges in the United States of America provides that section 33 of the CFA does not apply to trades entered into a commodity futures exchanges designated by the United States (U.S.) Commodity Futures Trading Commission (CFTC) under the U.S. Commodity Exchange Act (CEA);AND WHEREAS the ICE Futures U.S. has not requested as part of the Application that the Exchange Relief apply to the operation of any trading system or platform that is a "swap execution facility" as defined in section 1a of the CEA, or to the provision of access to any such trading system or platform to prospective participants in Ontario;
AND WHEREAS ICE Futures U.S. has represented to the Commission that:
1. The Applicant is a Delaware corporation, designated as a contract market by the United States Commodity Futures Trading Commission (the "CFTC") pursuant to Section 5 of the U.S. Commodity Exchange Act (the "CEA"). The Applicant is owned by the Intercontinental Exchange, Inc. ("ICE, Inc.") in accordance with a merger agreement consummated on January 12, 2007. ICE, Inc. is a public company governed by the laws of the State of Delaware and listed on the New York Stock Exchange. ICE Inc. and its affiliates are collectively referred to as the "ICE Group."
2. The Applicant is, in turn, the sole shareholder of ICE Clear U.S., Inc. (formerly known as the New York Clearing Corporation or NYCC) ("ICE Clear U.S."), the New York Futures Exchange, Inc. ("NYFE"), and eCOPS, LLC.
3. The Applicant is supported by its designated clearing houses, ICE Clear US, Inc., a wholly owned subsidiary of the Applicant, which clears and provides financial security to its clearing members with respect to contracts other than Energy Contracts (as defined below), and ICE Clear Europe Limited, a U.K. affiliate, which clears all of the Applicant's Energy Contracts. ICE Clear US, Inc. and ICE Clear Europe Limited are registered derivatives clearing organizations under the Commodity Exchange Act ("CEA") and regulated by the CFTC.
4. As a Designated Contract Market (a "DCM"), the Applicant offers a variety of futures contracts and options on futures contracts related to: (i) agricultural commodities such as canola, cocoa, coffee, cotton, frozen concentrated orange juice, and sugar; (ii) energy contracts related to biofuels, crude and refined oil products, electricity, liquefied natural gas, natural gas, natural gas liquids, and petrochemicals ("Energy Contracts"); (iv) physical environmental products; (v) equity indices; (vi) currency pairs; (vii) U.S. dollar index; (viii) interest rates; and (ix) precious metals (collectively, "ICE Futures U.S. Contracts").
5. Pursuant to its regulation by the CFTC, the Applicant is required to demonstrate its ongoing compliance with various "Core Principles" applicable to all U.S. DCMs. The statutory Core Principles are described in Section 5 of the CEA and include requirements relating to, among others, fitness and properness, systems and controls, maintenance of an orderly market, investor protection, creation and maintenance of necessary records, avoidance of anti-competitive actions, minimizing conflicts of interest in the decision-making process and establishing a process for resolving such conflicts, rule-making, and other matters including monitoring and enforcement compliance with a DCM's own rules.
6. The CFTC monitors trading on ICE Futures U.S. and receives daily transaction and other reports from the Applicant. The CFTC also undertakes periodic in-depth audits or "rule reviews" of the Applicant's compliance with certain of the statutory Core Principles.
7. The Applicant is required under its regulations to provide to the CFTC on request access to all records. In addition, ICE Futures U.S. Rule 6.50 requires the disclosure of information to the regulatory authority of any foreign jurisdiction in which it has been approved to conduct business, if such disclosure is a condition of approval.
8. The Applicant proposes to offer direct electronic access to trading in ICE Futures U.S. Contracts to prospective participants in Ontario ("Ontario Participants"), either by way of (i) membership in ICE Futures U.S., (ii) via direct access sponsored by a member of ICE Clear U.S. or ICE Clear Europe, as applicable (a "Clearing Member") (such non-Clearing Member participants, "Direct Access Users"), or (iii) through order-routing arrangements where orders are routed through a Clearing Member onto the exchange.
9. The Applicant expects that potential Ontario Participants seeking direct access in accordance with above paragraph 8 will be certain Canadian financial institutions (within the meaning of such term in subsection 1.1(3) of National Instrument 14-101 Definitions) and certain other market participants that have a head office or principal place of business in Ontario, such as (i) dealers that are engaged in the business of trading commodity futures in Ontario; (ii) utilities and other commercial enterprises that are exposed to risks attendant upon fluctuations in the price of a commodity; (iii) institutional investors and proprietary trading firms; (iv) Banks; and (v) market participants that have obtained an exemption from the registration requirement under section 22 of the CFA. In each case, ICE Futures U.S. expects that Ontario Participants will be (i) dealers and other entities that are engaged in the business of trading commodity futures and commodity options in Ontario, (ii) Hedgers, (iii) Banks, or (iv) other market participants that have otherwise obtained an exemption from the registration requirement under section 22 of the CFA.
10. ICE Futures U.S. Contracts fall under the definitions of "commodity futures contract" or "commodity futures option" set out in Section 1 of the CFA. ICE Futures U.S. is therefore considered a "commodity futures exchange" as defined in Section 1 of the CFA and is prohibited from carrying on business in Ontario unless it is registered or exempt from registration as an exchange under Section 15 of the CFA.
11. The Applicant seeks to provide Ontario Participants with direct, electronic access to trading in ICE Futures U.S. Contracts and as a result, is considered by the Commission to be "carrying on business as a commodity futures exchange" in Ontario.
12. The Applicant is not registered with or recognized by the Commission as a commodity futures exchange under the CFA and no ICE Futures U.S. Contracts have been accepted by the Director (as defined in the OSA) under the CFA; therefore, ICE Futures U.S. Contracts are considered "securities" under paragraph (p) of the definition of "security" set out in Section 1(1) of the OSA and Applicant is considered a "stock exchange" under the OSA and is prohibited from carrying on business in Ontario unless it is recognized or exempt from recognition under section 21 of the OSA.
13. While ICE Futures U.S. Contracts are also considered "securities" under paragraph (p) of the definition of "security" in section 1 of the OSA, for the reasons outlined in the preceding paragraph, ICE Futures U.S. Contracts would not be considered "securities" under any other paragraph contained in that definition, nor would any ICE Futures U.S. Contract be considered a "derivative" as defined in section 1 of the OSA.
14. As above, given the Applicant seeks to provide Ontario Participants with direct, electronic access to trading in ICE Futures U.S. Contracts, it is considered by the Commission to be "carrying on business as a stock exchange" in Ontario.
15. The exemption from registration in subsection 32(a) of the CFA applies for trades "by a hedger through a dealer." This exemption will be available for trades in ICE Futures U.S. Contracts by Ontario-resident Hedgers that route orders to ICE Futures U.S. through ICE Futures U.S. Clearing Members that are dealers. However, this exemption will not be available for trades in ICE Futures U.S. Contracts by Ontario-resident Hedgers that become Direct Access Users or non-clearing ICE Futures U.S. members given they will have direct electronic access to ICE Futures U.S. and will not execute trades through dealers. For this reason, the ICE Futures U.S. sought and obtained the Hedger Relief under the Exemption Order.
16. Section 35.1 of the OSA provides that certain financial institutions are exempt from the requirement to be registered under the OSA to act as dealers provided that the conditions of the exemption are met. However, there is no corresponding exemption from registration for trades by these types of financial institutions in the CFA. For this reason, ICE Futures U.S. seeks Commission approval for the Bank Relief.
17. ICE Futures U.S. requests the Participant Relief for the purpose of offering trading access to those market participants that have obtained an order from the Commission exempting them from the requirement to be registered under section 22 the CFA. Given these represent exempted market participants, the Applicant seeks Commission approval allowing these participants to trade in ICE Futures U.S. markets.
18. ICE Futures U.S. maintains membership criteria that all applicants must satisfy before their applications are considered: (i) if a natural person, be at least twenty-one (21) years of age, of good character, reputation, and business integrity with adequate financial resources to assume the responsibilities and privileges of being a member, and (ii) if a firm, be of good reputation and business integrity with adequate financial resources to assume the responsibilities and privileges of being a member.
19. All Clearing Members that guarantee a Direct Access User or provide order routing access to ICE Futures U.S. to an Ontario client will be registered futures commission merchants with the CFTC. Such clearing members are subject to the compliance requirements of the CEA, the CFTC and the National Futures Association as they relate to customer accounts, including various know-your-client, suitability, risk-disclosure, anti-money laundering, and anti-fraud requirements. These requirements, in conjunction with the ICE Clear U.S. or ICE Clear Europe (as applicable) margin requirements that apply to all Clearing Members and subsequently to their clients whose trades they guarantee, ensure that Ontario firms seeking to become Direct Access Users or gain order routing access through a Clearing Member are subjected to appropriate due diligence procedures and fitness criteria. In addition, Direct Access Users are required to sign the ICE Futures U.S. Participant Agreement making them responsible for, among other things, compliance with the Applicant's exchange rules.
20. Based on the facts set out in the Application, ICE Futures U.S. satisfies the criteria for exemption set out in Appendix 1 of Schedule "A" to this order;
AND WHEREAS ICE Futures U.S. has acknowledged to the Commission that the scope of the Exchange Relief or Registration Relief and the terms and conditions imposed by the Commission set out in Schedule "A" to this order may change as a result of the Commission's monitoring of developments in international and domestic capital markets or ICE Futures U.S.' activities, or as a result of any changes to the laws in Ontario affecting trading in derivatives, Commodity Futures or securities;
AND WHEREAS based on the Application, together with the representations made by and acknowledgements of ICE Futures U.S. to the Commission, the Commission has determined that:
(a) ICE Futures U.S. satisfies the criteria for exemption set out in Appendix 1 of Schedule "A";
(b) the extension of the Exchange Relief would not be prejudicial to the public interest; and
(c) the granting of the Registration Relief would not be prejudicial to the public interest;
AND WHEREAS the Exchange Relief granted by the Commission will not apply to the operation of any trading system or platform that is a "swap execution facility" as defined in section 1a of the CEA, or to the provision of access to any such trading system or platform to prospective participants in Ontario;
IT IS HEREBY ORDERED by the Commission that:
(a) pursuant to section 147 of the OSA, ICE Futures U.S. continues to be exempt from recognition as an exchange under subsection 21(1) of the OSA;
(b) pursuant to section 80 of the CFA, ICE Futures U.S. continues to be exempt from registration as a commodity futures exchange under subsection 15(1) of the CFA;
(c) pursuant to section 38 of the CFA, trades in ICE Futures U.S. Contracts by Hedgers that are Ontario Participants continue to be exempt from the registration requirement under section 22 of the CFA;
(d) pursuant to section 38 of the CFA, trades in ICE Futures U.S. Contracts by Banks that are Ontario Participants entering orders as principal and only for their own accounts are exempt from the registration requirement under section 22 of the CFA; and
(e) pursuant to section 38 of the CFA, trades in ICE Futures U.S. Contracts by Ontario Participants (as defined in the Exemption Order) that are not dealers, Hedgers, or Banks, but have obtained an exemption from the requirement to be registered under the CFA are exempt from the registration requirement under section 22 of the CFA.
PROVIDED THAT
a. ICE Futures U.S. complies with the terms and conditions attached hereto as Schedule "A."
b. The Bank Relief and the Participant Relief shall expire upon the coming into force of legislation or a rule by the Commission regarding the imposition of business conduct obligations on market participants in connection with the trading of exchange-traded derivatives with investors in Ontario.
DATED September 1, 2009, as varied and restated on March 27, 2025.
"Michelle Alexander"
Manager
Trading & Markets Division
SCHEDULE "A"
TERMS AND CONDITIONS
Meeting Criteria for Exemption
1. ICE Futures U.S. will continue to meet the criteria for exemption included in Appendix 1 to this schedule.
Regulation of ICE Futures U.S.
2. The Applicant will maintain its status as a DCM with the CFTC and will continue to be subject to the supervision of the CFTC, or any successor regulatory body, as a DCM, or any successor category of recognition.
3. The Applicant will continue to comply with the ongoing compliance requirements set out in the Core Principles under section 5 of the CEA or any successor compliance requirements.
4. The Applicant must do everything within its control, which would include cooperating with the Commission as needed, to carry out its activities as an exchange exempted from recognition under subsection 21(1) of the OSA, as a commodity futures exchange exempted from registration under subsection 15(1) of the CFA, and in compliance with Ontario securities law and Ontario commodity futures law.
Access
5. The Applicant will not allow an Ontario Participant to become a Direct Access User or an ICE Futures U.S. member unless they are appropriately registered to trade in ICE Futures U.S. Contracts, is a Hedger, is a Bank, or has obtained an exemption from registration. In making this determination, the Applicant may reasonably rely on a written representation from the Ontario Participant that specifies either that it is appropriately registered to trade in ICE Futures U.S. Contracts, is a Hedger, is a Bank, or has obtained an exemption from registration, and ICE Futures U.S. will notify such Ontario User that this representation is deemed to be repeated each time it enters an order for an ICE Futures U.S. Contract.
6. Each Ontario Participant that intends to rely on the Hedger Relief will be required to, as part of its application documentation or continued access to trading in ICE Futures U.S. Contracts:
(a) represent that it is a Hedger;
(b) acknowledge that the Applicant deems the Hedger representation to be repeated by the Ontario Participant each time it enters an order for an ICE Futures U.S. Contract and that the Ontario Participant must be a Hedger for the purposes of each trade resulting from such an order;
(c) agree to notify the Applicant if it ceases to be a Hedger;
(d) represent that it will only enter orders for its own account;
(e) acknowledge that it is a market participant under the CFA and is subject to applicable requirements; and
(f) acknowledge that its ability to continue to rely on the Hedger Relief in accessing trading on ICE Futures U.S. will be dependent on the Commission continuing to grant the relief and may be affected by changes to the terms and conditions imposed in connection with the Hedger Relief or by changes to Ontario securities laws or Ontario commodity futures laws pertaining to derivatives, Commodity Futures or securities.
7. Each Ontario Participant that intends to rely on the Bank Relief will be required to, as part of its application documentation or continued access to trading in ICE Futures U.S. Contracts:
(a) represent that it will only enters as principal and for its own account only;
(b) represent that it is a Bank;
(c) acknowledge that the Bank Relief may be affected by changes to the terms and conditions imposed in connection with the Bank Relief or by changes to Ontario securities laws or Ontario commodity laws pertaining to derivatives, Commodity Futures or securities; and
(d) represent that it is not engaging in activities prohibited by its governing legislation.
8. Each Ontario Participant that intends to rely on the Participant Relief will be required to, as part of its application documentation or continued access to trading in ICE Futures U.S. Contracts:
(a) represent that it is an exempted participant from the registration requirement under section 22 of the CFA;
(b) acknowledge that the Applicant deems the exempted participant representation to be repeated by the Ontario Participant each time it enters an order for an ICE Futures U.S. Contract and that the Ontario Participant must be an exempted participant for the purposes of each trade resulting from such an order;
(c) agree to notify the Applicant if it ceases to be an exempted participant;
(d) represent that it will only enter orders for its own account;
(e) acknowledge that it is a market participant under the CFA and is subject to applicable requirements; and
(f) acknowledge that its ability to continue to rely on the Participant Relief in accessing trading on ICE Futures U.S. will be dependent on the Commission continuing to grant the relief and may be affected by changes to the terms and conditions imposed in connection with the Participant Relief or by changes to Ontario securities laws or Ontario commodity futures laws pertaining to derivatives, Commodity Futures, or securities.
9. The Applicant will require Ontario Participants to notify it if their registration or exemption from registration has been revoked, suspended, or amended by the Commission or if they have ceased to be eligible for the Registration Relief and, following notice from the Ontario Participant or the Commission and subject to applicable laws, the Applicant will promptly restrict the Ontario Participant's access to ICE Futures U.S. if the Ontario Participant is no longer appropriately registered with the Commission, or is no longer eligible for the Registration Relief.
10. The Applicant must provide guidance to all its Clearing Members that provide access to trading for order-routing clients that are Ontario Participants that indicates that the ICE Futures U.S. Clearing Member is permitted to grant such access provided that (i) the order-routing client is a registered futures commission merchant (FCM) under the CFA; (ii) the ICE Futures U.S. Clearing Member is a registered FCM under the CFA or (iii) the ICE Futures U.S. Clearing Member is regulated as a "dealer" (as that term is defined in subsection 1(1) of the CFA) in its home jurisdiction and the order-routing client is a Hedger or is able to rely on another exemption from registration under the CFA.
Trading by Ontario Participants
11. The Applicant will not provide access to an Ontario Participant to trading in the exchange-traded products of an exchange other than those of ICE Futures U.S., unless such other exchange has sought and received appropriate regulatory standing in Ontario.
12. The Applicant will not provide access to an Ontario Participant/User to trading in ICE Futures U.S. Contracts other than those that meet the definition of "commodity futures contract" or "commodity futures option" as defined in subsection 1(1) of the CFA, and which also fall under paragraph (p) of the definition of "security" in subsection 1(1) of the OSA, without prior Commission approval.
Submission to Jurisdiction and Agent for Service
13. The Applicant submits to the non-exclusive jurisdiction of (i) the courts and administrative tribunals of Ontario and (ii) an administrative proceeding in Ontario, in a proceeding arising out of, related to or concerning or in any other manner connected with the activities of ICE Futures U.S. in Ontario.
14. The Applicant will file with the Commission a valid and binding appointment of an agent for service in Ontario upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal, penal or other proceeding arising out of or relating to or concerning the Applicant's activities in Ontario.
Prompt Notice
15. The Applicant will promptly notify staff of the Commission of any of the following:
(a) any material change to the access model, including eligibility criteria, for Ontario Participants,
(b) any authorization to carry on business granted by the CFTC is revoked or suspended or made subject to terms or conditions on Applicant's operations;
(c) the Applicant institutes a petition for a judgment of bankruptcy or insolvency or similar relief, or to wind up or liquidate ICE Futures U.S. or has a proceeding for any such petition instituted against it;
(d) a receiver is appointed for the Applicant or the Applicant makes any voluntary arrangement with creditors;
(e) The Applicant is not in compliance with this Order or with any applicable requirements, laws or regulations of the CFTC where it is required to report such non-compliance to the CFTC; and
(f) any known investigations or disciplinary action by the CFTC or any other regulatory authority to which the Applicant is subject relating to the discharge by the Applicant of its regulatory obligations.
Semi-Annual Reporting
16. The Applicant will maintain the following updated information and submit such information in a manner and form acceptable to the Commission on a semi-annual basis (by July 31 for the first half of the calendar year and by January 31 of the following year for the second half), and at any time promptly upon the request of staff of the Commission:
(a) a current list of all Ontario Participants and whether the Ontario Participant is registered under Ontario securities laws or is exempt from or not subject to registration, and, to the extent known by the Applicant, other persons or companies located in Ontario trading as customers of participants (Other Ontario Participants);
(b) a list of all Ontario Participants against whom disciplinary action has been taken since the previous report by ICE Futures U.S., or, to the best of the Applicant's knowledge, by the CFTC with respect to such Ontario Participants' activities on ICE Futures U.S. and the aggregate number of disciplinary actions taken against all participants since the previous report by ICE Futures U.S.;
(c) a list of all active investigations since the previous report by ICE Futures U.S. relating to Ontario Participants and the aggregate number of active investigations since the previous report relating to all participants undertaken by ICE Futures U.S.;
(d) a list of all Ontario applicants for status as a participant who were denied such status or access to ICE Futures U.S. since the previous report, together with the reasons for each such denial; and
(e) for each product,
(i) the total trading volume and value originating from Ontario Users, and, to the extent known by the Applicant, from Other Ontario Participants, presented on a per Ontario User or per Other Ontario Participant basis; and
(ii) the proportion of worldwide trading volume and value on the Applicant conducted by Ontario Participants, and, to the extent known by the Applicant, by Other Ontario Participants, presented in the aggregate for such Ontario Users and Other Ontario Participants;
provided in the required format.
Information Sharing
17. The Applicant will, subject to applicable laws, share any and all information within the care and control of ICE Futures U.S. and otherwise co-operate wherever reasonable with the Commission or its staff.
APPENDIX 1
CRITERIA FOR EXEMPTION
PART 1 REGULATION AND OVERSIGHT OF THE EXCHANGE
1.1 Regulation of the Exchange
The Exchange is regulated in an appropriate manner in another jurisdiction by a Foreign Regulator. The regulatory scheme of the Foreign Regulator is transparent and generally comparable to that in Ontario.
1.2 Authority of the Foreign Regulator
The Foreign Regulator has the appropriate authority and procedures for oversight of the Exchange. This oversight includes regular, periodic regulatory examinations of the Exchange by the Foreign Regulator.
PART 2 CORPORATE GOVERNANCE
2.1 Fair Representation
The governance structure of the Exchange provides for:
i. Effective oversight of the Exchange;
ii. That business and regulatory decisions are in keeping with its public interest mandate;
iii. appropriate, fair, and meaningful representation on its Board and any committee thereof; and
iv. appropriate representation by independent directors on the Board and any committee thereof.
2.2 Appropriate Provisions for Directors and Officers
There are appropriate qualifications, renumeration, limitation of liability, and indemnity provisions for directors and officers.
2.3 Fitness
The Exchange takes reasonable steps to ensure that each officer and director is a fit and proper person and past conduct of each officer or director affords reasonable grounds for belief that the officer or director will perform his or her duties with integrity.
2.4 Conflicts of Interest
The Exchange has appropriate conflict of interest provisions for all directors, officers, and employees.
PART 3 FEES
3.1 Fees
The Exchange's process for setting fees is fair, transparent, and appropriate. Any and all fees imposed by the Exchange on its participants are equitably allocated, do not have the effect of creating barriers to access and are balanced with the criteria that the Exchange has sufficient revenues to satisfy its responsibilities.
PART 4 REGULATION OF PRODUCTS
4.1 Approval of Products
The products traded on the Exchange are approved by the appropriate authority.
4.2 Product Specifications
The terms and conditions of trading the products are in conformity with normal commercial business practices for the trade in the product.
4.3 Risks Associated with Trading Products
The Exchange maintains adequate provisions to measure, manage, and mitigate the risks associated with trading products on the Exchange, including, but not limited to, margin requirements, intraday margin calls, daily trading limits, price limits, position limits, and internal controls.
PART 5 ACCESS
5.1 Fair Access
The requirements of the Exchange relating to access to the facilities of the Exchange, the imposition of limitations or conditions on access, and denial of access are approved by the Foreign Regulator and are fair and reasonable, including in respect of notice, an opportunity to be heard or make representations, the keeping of records, the giving of reasons, and the provisions for appeals.
5.2 Details of Access Criteria
i. The Exchange has established appropriate written standards for access to its services including requirements to ensure:
a. participants are appropriately registered as applicable under Ontario securities laws or Ontario commodity futures laws, or exempted from these requirements,
b. the competence, integrity, and authority of systems users, and
c. systems users are adequately supervised.
ii. The access standards and the process for obtaining, limiting, and denying access are fair, transparent and applied reasonably.
iii. The Exchange does not unreasonably prohibit, condition, or limit access by a person or company to services offered by it.
5.3 Access for Ontario Persons
The Exchange provides direct access, either through terminals, data feeds or third party provided interfaces, to only those Ontario persons that are duly registered or licensed under Ontario.
PART 6 RULEMAKING
6.1 Purpose of Rules
The Exchange maintains rules, policies, and other similar instruments as are necessary or appropriate to govern and regulate all aspects of its business and affairs and such rules are designed to, in particular,
i. ensure compliance with the rules of the Exchange and applicable legislation;
ii. prevent fraudulent and manipulative acts and practices;
iii. promote just and equitable principles of trade;
iv. foster cooperation and coordination with persons or companies engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in, the products trade on the Exchange;
v. provide for appropriate discipline;
vi. ensure a fair and orderly market; and
vii. ensure that the Exchange business is conducted in a manner so as to afford protection to investors.
6.2 No Discrimination or Burden on Competition
The rules of the Exchange do not:
i. permit unreasonable discrimination among issuers, if applicable, and participants; or
ii. impose any burden on competition that is not reasonably necessary or appropriate.
PART 7 SYSTEMS AND TECHNOLOGY
7.1 System Capability/Scalability
For each of its systems that support order entry, order routing, execution, data feeds, trade reporting and trade comparison, capacity, and integrity requirements, the Exchange:
i. makes reasonable current and future capacity estimates;
ii. conducts capacity stress tests of critical systems to determine the ability of those systems to process transactions in an accurate, timely, and efficient manner;
iii. reviews the vulnerability of those systems and data center computer operations to internal and external threats, including physical hazards and natural disasters;
iv. ensures that safeguards that protect a system against unauthorized access, internal failures, human errors, attacks, and natural catastrophes that might cause improper disclosures, modification, destruction, or denial of service are subject to an independent and ongoing audit which should include the physical environment, system capacity, operating system testing, documentation, internal controls, and contingency plans;
v. ensures that the configuration of the system has been reviewed to identify potential points of failure, lack of back-up, and redundant capabilities;
vi. maintains reasonable procedures to review and keep current the development and testing methodology of those systems; and
vii. maintains reasonable backup, contingency and business continuity plans, disaster recovery plans, and internal controls.
7.2 Information Technology Risk Management Procedures
Procedures are in place that:
i. handle trading errors, trading halts, and circuit breakers;
ii. ensure the competence, integrity, and authority of system users; and
iii. ensure that the system users are adequately supervised.
PART 8 FINANCIAL VIABILITY
8.1 Financial Viability
The Exchange has sufficient financial resources for the proper performance of its functions.
PART 9 CLEARING AND SETTLEMENT
9.1 Relationship with Clearing House
The Exchange has a clearing relationship with an established clearing house and all transactions executed on the Exchange are cleared through the Clearing House.
9.2 Regulation of the Clearing House
The Clearing House and direct clearing members are subject to acceptable regulation.
9.3 Authority of Regulator
The Foreign Regulator has the appropriate authority and procedures for oversight of the Clearing House. This oversight includes regular, periodic regulatory examinations of the Clearing House by the Foreign Regulator.
9.4 Sophistication of Technology of Clearing House
The Exchange has assured itself that the information technology used by the Clearing House has been adequately reviewed and tested and provides at least the same level of safeguards as required of the Exchange.
9.6 Risk Management of Clearing House
The Exchange has assured itself that the Clearing House has established appropriate risk management policies and procedures, contingency plans, default procedures, and internal controls.
PART 10 TRADING PRACTICES
10.1 Trading Practices
Trading practices are fair, properly supervised, and not contrary to public interest.
10.2 Market Making Provisions
Market making provisions and other provisions to ensure market liquidity, if any, are fair and equitable to all market participants.
10.3 Orders
Rules pertaining to order size and limits are fair and equitable to all market participants and the system for accepting and distinguishing between and executing different types of orders is fair, equitable, and transparent.
10.4 Transparency
Adequate provision has been made to record and publish details of pricing and trading.
10.5 Market Limits
Market limits have been established as to ensure the integrity of the Exchange during times of volatility.
PART 11 COMPLIANCE, SURVEILLANCE, AND ENFORCEMENT
11.1 Jurisdiction
The Exchange or the Foreign Regulator has the jurisdiction to perform member and market regulation, including the ability to set rules, conduct compliance reviews, and perform surveillance and enforcement.
11.2 Member and Market Regulation
The Exchange or its Foreign Regulator maintains appropriate systems, resources, and procedures for evaluating compliance with Exchange and legislative requirements and disciplining participants.
11.3 Recordkeeping
The Exchange maintains adequate provisions for keeping books and records, including operations of the exchange, audit trail information on all trades, and compliance and/or violations of Exchange requirements and securities legislation.
11.4 Availability of Information to Regulator
The Exchange has mechanisms in place to ensure that the information necessary to conduct adequate surveillance of the system for supervisory and enforcement purposes is available to the relevant regulatory authorities on a timely basis.
PART 12 INFORMATION SHARING AND OVERSIGHT ARRANGEMENTS
12.1 Information Sharing and Oversight Agreement
Satisfactory information sharing and oversight agreements exist among the OSC and the Foreign Regulator.
PART 13 DUE PROCESS
13.1 Due Process
For any decision made by the Exchange that affects a participant, or an applicant to be a participant, including a decision in relation to access, exemptions, or discipline, the Exchange ensures that:
i. parties are given an opportunity to be heard or make representations, and
ii. it keeps a record of, gives reasons for, and provides for appeals or reviews of its decisions.
PART 14 OUTSOURCING
14.1 Outsourcing
Where the Exchange has outsourced any of its key services or systems to a service provider, it has appropriate and formal arrangements and processes in place that permit it to meet its obligations and that are in accordance with industry best practices.
PART 15 IOSCO PRINCIPLES
15.1 IOSCO Principles
The Exchange adheres to the IOSCO principles to the extent consistent with the law of the foreign jurisdiction.