[Federal Register Volume 76, Number 139 (Wednesday, July 20, 2011)]
[Notices]
[Pages 43376-43380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18307]
[[Page 43376]]
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DEPARTMENT OF THE TREASURY
Order Granting Temporary Exemptions From Certain Government
Securities Act Provisions and Regulations in Connection With a Request
From ICE Clear Credit LLC (Formerly ICE Trust U.S. LLC) Related to
Central Clearing of Credit Default Swaps, and Request for Comments
AGENCY: Department of the Treasury, Office of the Assistant Secretary
for Financial Markets.
ACTION: Notice of temporary exemptions.
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SUMMARY: The Department of the Treasury (``Treasury'' or ``We'') is
granting by order temporary exemptions from certain Government
Securities Act of 1986 provisions and regulations regarding
transactions in credit default swaps that reference government
securities. ICE Clear Credit LLC requested these temporary exemptions
for itself, its Clearing Members, and certain brokers that are not
registered as government securities brokers. Treasury will revisit
these exemptions when the Commodity Futures Trading Commission and the
Securities and Exchange Commission issue final rules or guidance to
implement Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. The temporary exemptions could become unavailable if
the facts and circumstances, as represented in the request, change.
Treasury is also soliciting public comment on this order.
DATES: Effective date: July 16, 2011. Submit comments on or before
September 19, 2011.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
You may download this order from http:// www.regulations.gov or the
Bureau of the Public Debt's Web site at http://www.treasurydirect.gov.
You may also e-mail comments to [email protected].
Paper Comments
Send paper comments to Department of the Treasury, Bureau of the
Public Debt, Government Securities Regulations Staff, 799 9th Street,
NW., Washington, DC 20239-0001.
Please submit your comments using only one method and provide your
full name and mailing address. We will post all comments on the Bureau
of the Public Debt's Web site at http://www.treasurydirect.gov. The
order and comments will also be available for public inspection and
copying at the Treasury Department Library, Main Treasury Building,
1500 Pennsylvania Avenue, NW., Washington, DC 20220. To visit the
library, call (202) 622-0990 for an appointment. In general, comments
received, including attachments and other supporting materials, are
part of the public record and are available to the public. Do not
submit any information in your comment or supporting materials that you
consider confidential or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Lori Santamorena, Kurt Eidemiller, or
Kevin Hawkins, Department of the Treasury, Bureau of the Public Debt,
at 202-504-3632.
SUPPLEMENTARY INFORMATION:
I. Section 15C of the Securities Exchange Act of 1934
Section 15C of the Securities Exchange Act of 1934 (``Exchange
Act''), as amended by the Government Securities Act of 1986 (``GSA'')
\1\ governs transactions in government securities \2\ by government
securities brokers \3\ and government securities dealers.\4\ Treasury
regulations promulgated under the GSA impose obligations on government
securities brokers and government securities dealers concerning
financial responsibility, protection of customer securities and
balances, and recordkeeping and reporting.
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\1\ Public Law 99-571, 100 Stat. 3208 (1986).
\2\ The term government securities, as defined at 15 U.S.C.
78c(a)(42), means: (A) Securities which are direct obligations of,
or obligations guaranteed as to principal or interest by, the United
States; (B) securities which are issued or guaranteed by the
Tennessee Valley Authority or by corporations in which the United
States has a direct or indirect interest and which are designated by
the Secretary of the Treasury for exemption as necessary or
appropriate in the public interest or for the protection of
investors; (C) securities issued or guaranteed as to principal or
interest by any corporation the securities of which are designated,
by statute specifically naming such corporation, to constitute
exempt securities within the meaning of the laws administered by the
SEC; and (D) generally ``any put, call, straddle, option, or
privilege'' on a government security other than one that is traded
on a national securities exchange or for which quotations are
disseminated through an automated quotation system operated by a
registered securities association. Certain Canadian government
obligations are also included for certain purposes.
\3\ A government securities broker generally is ``any person
regularly engaged in the business of effecting transactions in
government securities for the account of others,'' with certain
exclusions. 15 U.S.C. 78c(a)(43).
\4\ A government securities dealer generally is ``any person
engaged in the business of buying and selling government securities
for his own account, through a broker or otherwise,'' with certain
exclusions. 15 U.S.C. 78c(a)(44).
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Section 15C(a) of the Exchange Act (Title I of the GSA) requires
government securities brokers and government securities dealers that
effect transactions in or induce the purchase or sale of government
securities to be registered with the Securities and Exchange Commission
(``SEC'').\5\ This registration requirement does not apply to financial
institutions or brokers and dealers that are already registered under
the Exchange Act, as long as written notice is filed with the
appropriate regulatory agency.\6\ All government securities brokers and
government securities dealers are required to comply with the
requirements in Treasury's GSA regulations that are set out at 17 CFR
parts 400-449.\7\ Treasury's GSA regulations, for the most part,
incorporate with some modifications SEC rules for non-financial
institution government securities brokers and government securities
dealers and the appropriate regulatory agency \8\ rules for financial
institutions that are required to file notice as government securities
brokers and government securities dealers.
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\5\ 15 U.S.C. 78o-5(a)(1)(A).
\6\ 15 U.S.C. 78o-5(a)(1)(B).
\7\ 17 CFR part 400 Rules of general application; 17 CFR part
401 Exemptions; 17 CFR part 402 Financial responsibility; 17 CFR
part 403 Protection of customer securities and balances; 17 CFR part
404 Recordkeeping and preservation of records; 17 CFR part 405
Reports and audit; 17 CFR part 420 Large position reporting; and 17
CFR part 449 Forms, section 15C of the Securities Exchange Act of
1934. The GSA regulations also include requirements for custodial
holdings by depository institutions at 17 CFR part 450, which were
issued under Title II of the GSA.
\8\ The definition of appropriate regulatory agency with respect
to a government securities broker or a government securities dealer
is set out at 15 U.S.C. 78c(a)(34)(G). The definition includes the
Board of Governors of the Federal Reserve System, the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, and in
limited circumstances the SEC.
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Section 15C(a)(5) of the Exchange Act provides that the Secretary
of the Treasury (``Secretary''):
By rule or order, upon the Secretary's own motion or upon
application, may conditionally or unconditionally exempt any
government securities broker or government securities dealer, or
class of government securities brokers or government securities
dealers, from any provision of subsection (a), (b), or (d) of this
section, other than subsection (d)(3), or the rules thereunder, if
the Secretary finds that such exemption is consistent with the
public interest, the protection of investors, and the purposes of
[the Exchange Act].
Treasury, in coordination with the SEC, has previously issued
several temporary exemptive orders to ICE Trust U.S. LLC (``ICE
Trust'') to facilitate the central clearing of credit default swaps
(``CDS'') \9\ that reference
[[Page 43377]]
government securities. On March 6, 2009, Treasury granted a temporary
exemption \10\ from the provisions of section 15C(a), (b), and (d)
(other than subsection (d)(3)) of the Exchange Act, and the rules
thereunder, to ICE Trust, certain ICE Trust participants, and certain
eligible contract participants (``ECPs'').\11\ In the same order
Treasury also granted a limited temporary exemption from certain GSA
regulatory requirements to government securities brokers and government
securities dealers that are not financial institutions.\12\ On December
7, 2009, Treasury extended the expiration date of these temporary
exemptions until March 7, 2010.\13\ On January 28, 2010, Treasury
granted a temporary, conditional exemption until March 7, 2010, to
certain ICE Trust Clearing Members and certain ECPs to accommodate
using ICE Trust to clear customer CDS transactions.\14\ On March 7,
2010, Treasury granted a conditional, temporary exemption from certain
GSA provisions and regulations to certain ICE Trust participants and
certain ECPs.\15\ In the same order Treasury also granted a temporary
exemption from certain GSA regulatory requirements for registered or
noticed government securities brokers and government securities dealers
that are not financial institutions. On November 30, 2010, Treasury
issued an order extending the expiration date of these temporary
exemptions until July 16, 2011.\16\ Treasury received no comments on
its previous orders.
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\9\ A CDS is a bilateral contract between two parties, known as
counterparties. The value of this financial contract is based on
underlying obligations of a single entity (reference entity) or on a
particular security or other debt obligation, or an index of several
such entities, securities, or obligations. Under a CDS contract, the
obligation of a seller to make payments is triggered by a default or
other credit event as to such entity or entities or such security or
securities.
\10\ 74 FR 10647, March 11, 2009 Order Granting Temporary
Exemptions from Certain Provisions of the Government Securities Act
and Treasury's Government Securities Act Regulations in Connection
with a Request on Behalf of ICE US Trust LLC Related to Central
Clearing of Credit Default Swaps, and Request for Comments,
available at: http://www.treasurydirect.gov/instit/statreg/gsareg/gsareq_treasexemptiveorder309.pdf.
\11\ ECPs are defined in section 1a(18) of the Commodity
Exchange Act, 7 U.S.C. 1 et seq. The use of the term ECPs in the
March 6, 2009 order refers to the definition of ECPs in effect on
March 6, 2009, and excludes persons that are ECPs under former
section 1a(12)(C).
\12\ Registered or noticed government securities brokers and
government securities dealers that are not financial institutions
were temporarily exempted from the regulations in 17 CFR parts 402,
403, 404, and 405 with exceptions.
\13\ 74 FR 64127, December 7, 2009 Order Extending Temporary
Exemptions from Certain Government Securities Act Provisions and
Regulations in Connection with a Request from ICE Trust U.S. LLC
Related to Central Clearing of Credit Default Swaps, available at:
http://www.treasurydirect.gov/instit/statreg/gsareg/FR_Treasury_Order_ICE_Extension_(12-7-09).pdf.
\14\ 75 FR 4626, January 28, 2010 Order Granting a Temporary
Exemption from Certain Government Securities Act Provisions and
Regulations in Connection with a Request from ICE Trust U.S. LLC
Related to Central Clearing of Credit Default Swaps, and Request for
Comments, available at: http://www.treasurydirect.gov/instit/statreg/gsareg/TreasuryICEOrderFedRegisterJan282010.pdf.
\15\ 75 FR 11627, March 11, 2010 Order Granting Temporary
Exemptions from Certain Government Securities Act Provisions and
Regulations in Connection with a Request From ICE Trust U.S. LLC
Related to Central Clearing of Credit Default Swaps, and Request for
Comments, available at: http://www.treasurydirect.gov/instit/statreg/gsareg/TreasuryExemptiveOrderMarch112010FedRegister.pdf.
\16\ 75 FR 75722, December 6, 2010 Order Extending Temporary
Exemptions from Certain Government Securities Act Provisions and
Regulations in Connection with a Request from ICE Trust U.S. LLC
Related to Central Clearing of Credit Default Swaps, available at:
http://www.treasurydirect.gov/instit/statreg/gsareg/TreasuryExemptiveOrderFedRegisterDec2010.pdf.
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II. Legislative Developments
President Obama signed the Dodd-Frank Wall Street Reform and
Consumer Protection Act (``Dodd-Frank Act'') \17\ into law effective
July 16, 2011, and the facts and circumstances for Treasury's previous
exemptive orders changed.
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\17\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
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The legislation was enacted, among other reasons, to reduce risk,
increase transparency, and promote market integrity within the
financial system, including by: (1) Providing for the registration and
comprehensive regulation of swap dealers, security-based swap dealers,
major swap participants and major security-based swap participants; (2)
imposing clearing and trade execution requirements on swaps and
security-based swaps, subject to certain exceptions; (3) creating
rigorous recordkeeping and real-time reporting regimes; and (4)
enhancing the rulemaking and enforcement authorities of the SEC and the
Commodity Futures Trading Commission (``CFTC'') with respect to, among
others, all registered entities and intermediaries subject to their
oversight.\18\
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\18\ See http://www.sec.gov and http://www.cftc.gov for a
listing of all related proposed rulemakings.
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Title VII of the Dodd-Frank Act established a comprehensive new
regulatory framework for swaps and security-based swaps, and provided
the SEC and the CFTC with the authority to regulate over-the-counter
derivatives. The SEC and CFTC, in consultation with the Board of
Governors of the Federal Reserve System, have issued proposed rules and
proposed interpretive guidance under the Commodity Exchange Act
(``CEA'') and the Exchange Act to implement relevant changes required
by provisions of the Dodd-Frank Act, including the regulation of
CDS.\19\
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\19\ Id.
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Under Title VII of the Dodd-Frank Act, the CFTC was given
regulatory authority over swaps and the SEC was given regulatory
authority over security-based swaps.\20\ The definition of the term
``security-based swap,'' however, excludes swaps based on ``exempted
securities.'' \21\ A CDS generally would be a swap and not a security-
based swap if it is based upon an exempted security (other than a
municipal security). Because the CFTC has jurisdiction over swaps and
the SEC has jurisdiction over security-based swaps, and because a CDS
on an exempted security would be a swap and not a security-based swap,
it is subject to CFTC jurisdiction.
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\20\ The statute defines ``security-based swap'' as an
agreement, contract, or transaction that is a ``swap'' (without
regard to the exclusion from that definition for security-based
swaps) and that also has certain characteristics specified in the
statute.
\21\ As of January 11, 1983, the date of enactment of the
Futures Trading Act of 1982, Public Law 97-44, 96 Stat. 2294,
section 3(a)(12) of the Exchange Act, 15 U.S.C. 78c(a)(12), provided
that, among other securities, ``exempted securities'' include: (i)
``Securities which are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States;'' (ii)
certain securities issued or guaranteed by corporations in which the
United States has a direct or indirect interest as designated by the
Secretary of the Treasury; and (iii) certain other securities as
designated by the SEC in rules and regulations.
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The CFTC and SEC recently took action to defer many Dodd-Frank
requirements regulating swaps and security-based swaps that would
otherwise have gone into effect on July 16, 2011. On June 14, 2011, the
CFTC issued a notice of proposed order and request for comment \22\
with respect to the effective dates of provisions of the Dodd-Frank Act
relating to the regulation of the swaps markets. Similarly, the SEC has
released orders \23\ granting temporary exemptions and other temporary
relief, and providing information on compliance dates, applicable to
the regulation of the security-based swaps markets. The SEC noted in
certain of its orders that the temporary exemptions extended neither to
the Exchange Act provisions applicable to government securities as set
forth in Section 15C and its underlying rules and regulations, nor to
the related definitions of ``government securities,'' ``government
securities broker,'' and ``government securities dealer.'' The SEC
further noted that it does not have authority under Section 36 of the
Exchange Act to issue
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exemptions in connection with these provisions.\24\
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\22\ Available at http://cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-15195a.pdf.
\23\Available at http://www.sec.gov/spotlight/dodd-frank.shtml.
\24\ 15 U.S.C. 78mm(b).
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III. ICE Clear Credit LLC (``ICE Credit'') Request for Exemption
On July 6, 2011, Treasury received a letter (``the ICE Credit
request'') \25\ from ICE Credit requesting that, to avoid legal
uncertainty, Treasury grant an exemption from the registration
provisions of the GSA and Treasury regulations thereunder to ICE Credit
and its Clearing Members \26\ and unregistered government securities
brokers \27\ who enter into transactions with ICE Credit Clearing
Members involving CDS that reference government securities and are
submitted to ICE Credit for clearance and settlement.
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\25\ Letter from Kevin R. McClear, General Counsel, ICE Trust
U.S. LLC to the Commissioner of the Public Debt, Van Zeck, July 6,
2011, available at: http://www.treasurydirect.gov/instit/statreg/gsareg/gsareg.htm. As noted in its request, on July 16, 2011, ICE
Trust reorganized its corporate structure. ICE Trust changed from a
New York-chartered limited purpose trust company to a Delaware
limited liability company. ICE Trust also changed its name from ICE
Trust U.S. LLC to ICE Clear Credit LLC and became a DCO with respect
to swaps.
\26\ The ICE Credit rulebook defines a Clearing Member as ``a
person that has been approved by ICE Credit for the submission of an
agreement or contract and that is party to an agreement with ICE
Credit specifically relating to transactions in agreement or
contract. Under ICE Credit rules, a Clearing Member must meet
substantial eligibility criteria prior to being permitted to become
a Clearing Member, which criteria include standards of business
integrity, financial capacity, creditworthiness, operational
capability, experience and competence as may be established by ICE
Credit from time to time.'' The ICE Credit rulebook is publicly
available online at https://www.theice.com/publicdocs/clear_us/ICE_Trust_Rules.pdf.
\27\ In its request, ICE Credit refers to unregistered
government securities brokers as ``inter-dealer brokers.'' See note
25, supra.
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In its request, ICE Credit contends that central clearing has
several important market efficiency and investor protection benefits
over clearing CDS on a bilateral basis. ICE Credit asserts that: a
highly regulated central counterparty with significant financial
resources substantially reduces the risk of counterparty default; the
ICE Credit Rules allow a streamlined process for a party to a CDS
transaction to move one or more pieces of its CDS portfolio from one
Clearing Member to another (portability), which will result in a more
efficient CDS marketplace, greater investor choice, and meaningful
investor protection; central clearing provides a robust mechanism for
the segregation and protection of margin provided by market
participants; and the central counterparty model improves transparency.
ICE Credit's request also acknowledges that ICE Credit will be
subject to a new regulatory framework that includes comprehensive
oversight of aspects of its CDS business including eligibility
requirements, books and records, systems, and margin requirements of
both ICE Credit and its Clearing Members. It also acknowledges that all
rule changes must be approved by the SEC in accordance with regulations
promulgated under Section 19(b) of the Exchange Act, and either self-
certified with or approved by the CFTC in accordance with the CEA.
Further, upon the effective date of Title VII of the Dodd-Frank Act,
Ice Credit will be deemed registered \28\ as a derivatives clearing
organization (``DCO'') \29\ with the CFTC and will be subject to
regular audit or risk reviews by the CFTC based on the 18 Core
Principles set forth in the CEA.\30\
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\28\ See Dodd-Frank Act section 725(b).
\29\ 7 U.S.C. 1a(9).
\30\ See Section 5b(c)(2) of the CEA.
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ICE Credit's request notes that it will be subject to regulation of
all aspects of its clearing activities, including eligibility
requirements, margin required from Clearing Members, and the procedures
relating to default. ICE Credit Clearing Members effecting customer
transactions in CDS will be registered as futures commission merchants
(``FCMs'') \31\ with the CFTC and as either broker-dealers or
securities-based swaps dealers with the SEC.
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\31\ 7 U.S.C. 1a(28).
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ICE Credit is also requesting an exemption for certain unregistered
government securities brokers. ICE Credit explains that its Clearing
Members may use the facilities of unregistered government securities
brokers to execute CDS and submit such transactions for clearance and
settlement to ICE Credit. ICE Credit notes that the use of unregistered
government securities brokers by CDS market participants is a means of
promoting an orderly and efficient market for CDS that reference
government securities.
ICE Credit also contends in its request that CDS that reference
government securities may not be exempt from the definition of
``security'' under the Exchange Act. As a result, and in the absence of
relief, ICE Credit, its Clearing Members, and certain unregistered
government securities brokers that are engaged in the business of
effecting transactions in government securities may have to register as
government securities brokers or government securities dealers in
accordance with section 15C of the Exchange Act.
ICE Credit believes that an exemption is warranted in light of the
comprehensive regulatory scheme imposed by the Dodd-Frank Act. ICE
Credit argues that the registration of ICE Credit, its Clearing
Members, and certain unregistered government securities brokers as
government securities brokers or government securities dealers could
create complex interpretive issues that result in legal uncertainty.
The ICE Credit request states that, to date, the products eligible
for clearing at ICE Credit include CDS transactions involving certain
indices and CDS contracts based on individual reference entities or
securities (single-name CDS contracts) that meet ICE Credit's risk
management and other criteria. The request also states that as of June
1, 2011, ICE Credit has cleared a notional amount of $666 billion of
CDS on behalf of its 15 current Clearing Members. To date, ICE Credit
has not cleared any CDS contracts that reference government securities.
IV. Temporary Exemption for ICE Credit, ICE Credit Clearing Members,
and Certain Unregistered Government Securities Brokers
In light of the comprehensive regulatory framework established by
the Dodd-Frank Act, the application of the GSA registration
requirements to ICE Credit, its Clearing Members, and certain
unregistered government securities brokers in CDS transactions that are
not currently registered or noticed government securities brokers or
government securities dealers is not warranted at this time.
Accordingly, the Secretary, by order, is granting a temporary
exemption to ICE Credit, its Clearing Members, and certain unregistered
government securities brokers from the provisions of section 15C(a),
(b), and (d) (other than subsection (d)(3)) of the Exchange Act, and
the rules thereunder.\32\ This temporary exemption is confined solely
to these entities' transactions in CDS that reference government
securities and are cleared by ICE Credit. This temporary exemption does
not apply to any ICE Credit Clearing Members or government securities
brokers that are registered or noticed as government securities brokers
or government securities dealers.\33\
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\32\ See note 5, supra.
\33\ As used in this order, registered or noticed government
securities brokers or government securities dealers encompasses all
brokers, dealers, and entities required to register or file notice
pursuant to section 15C(a)(1) of the Exchange Act.
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V. Temporary Exemption for Registered or Noticed Government Securities
Brokers and Government Securities Dealers That Are Not Financial
Institutions
The Secretary is also granting a temporary exemption to registered
or noticed government securities brokers and government securities
dealers that are not financial institutions \34\ from the regulations
in 17 CFR parts 402, 403, 404, and 405, with exceptions.\35\ This
temporary exemption is confined solely to these entities' transactions
in CDS that reference government securities and are cleared by ICE
Credit.
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\34\ A financial institution is defined in 15 U.S.C. 78c(a)(46).
\35\ This order does not exempt registered or noticed government
securities brokers or government securities dealers that are not
financial institutions from the regulations regarding capital
requirements, reserves and custody of securities, records and
reports, and quarterly security counts.
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With respect to noticed government securities brokers and
government securities dealers that are financial institutions (and also
ICE Credit Clearing Members), the GSA regulations generally adopt the
appropriate regulatory agency rules for financial institutions that are
comparable to the CFTC rules to which the temporary exemption does not
extend. The GSA regulations also incorporate rules of the appropriate
regulatory agencies that are otherwise applicable to financial
institutions.
Treasury is not extending this temporary exemption to financial
institution government securities brokers and government securities
dealers. They should continue to comply with existing rules.
Treasury believes that continuing to facilitate the central
clearing of CDS transactions through the granting of the temporary
exemptions in this order is consistent with the public interest, the
protection of investors, and the purposes of the Exchange Act. These
temporary exemptions will remain in effect unless Treasury revokes or
modifies them. As of the effective date of Treasury's order, the CFTC
and the SEC have not issued final rules or interpretive guidance to
implement Title VII of the Dodd-Frank Act.\36\ When they do, Treasury
will revisit these exemptions.
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\36\ See notes 21 and 22, supra.
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While providing temporary exemptions from certain provisions of
section 15C of the Exchange Act, Treasury is not making a
determination, for purposes of this order, on whether particular CDS
that reference government securities are ``government securities'' as
defined by the Exchange Act. The exemptions being granted in this order
are not intended to limit regulatory authority of other regulators.
VI. Consultations and Considerations
In granting these temporary exemptions, Treasury has consulted with
and considered the views of the staffs of the CFTC, the SEC, and the
appropriate regulatory agencies for financial institutions.
Treasury bases this order on the facts and circumstances presented
and representations made by ICE Credit in its request. These temporary
exemptions could become unavailable if the facts or circumstances
change such that the representations in the request are no longer
materially accurate. If this were to happen, the status of existing
positions in cleared CDS that reference government securities would
remain unchanged, but no new positions could be established pursuant to
the temporary exemptions unless approved by Treasury.
ICE Credit must promptly notify Treasury in writing if any of the
relevant information provided to obtain these temporary exemptions
changes.
VII. Solicitation of Comments
We request comments on the temporary exemptions we are granting in
this order to accommodate central clearing of CDS that reference
government securities by ICE Credit. We are also soliciting public
comment on whether there is a need for broader exemptive relief from
provisions of the GSA and Treasury regulations in light of the Dodd-
Frank Act amendments to the Exchange Act. For example, is it necessary
to provide similar exemptive relief to other entities that engage in
transactions in CDS that reference government securities and are not
submitted to a central counterparty (``uncleared'')?
Treasury will continue to monitor ICE Credit's progress and the
development of central counterparties for the CDS market and determine
to what extent, if any, additional action might be necessary.
Treasury also will continue to consult with the staffs of the CFTC,
the SEC, and the appropriate regulatory agencies for financial
institutions on this matter.
VIII. Conclusion
It is hereby ordered, pursuant to section 15C(a)(5) of the Exchange
Act, that:
(a) Temporary Exemption for ICE Clear Credit LLC (``ICE Credit''),
ICE Credit Clearing Members, and Certain Government Securities Brokers.
(1) Persons eligible. This temporary exemption is available to a)
ICE Credit and b) ICE Credit Clearing Members and unregistered
government securities brokers who enter into transactions with ICE
Credit Clearing Members involving CDS that reference government
securities and are submitted to ICE Credit for clearance and
settlement. However, this temporary exemption is not available to ICE
Credit Clearing Members and government securities brokers that are
registered or noticed as government securities brokers or government
securities dealers under section 15C(a)(1) of the Exchange Act.
(2) Scope of the temporary exemption. Subject to the exclusions in
paragraph (a)(1), such entities shall temporarily be exempt from the
provisions of section 15C(a), (b), and (d) (other than subsection
(d)(3)) of the Exchange Act, and the rules thereunder.
(b) Temporary Exemption for Registered or Noticed Government
Securities Brokers and Government Securities Dealers that are not
Financial Institutions.
ICE Credit Clearing Members and government securities brokers that
are registered or noticed government securities brokers and government
securities dealers but not financial institutions are exempt from the
regulations in 17 CFR parts 402, 403, 404, and 405 with respect to
their transactions with ICE Credit Clearing Members involving CDS that
reference government securities and are submitted to ICE Credit for
clearance and settlement. However, this order does not exempt
registered or noticed government securities brokers or government
securities dealers that are not financial institutions from the
following:
(1) The capital requirements for registered government securities
brokers and government securities dealers in part 402 of the GSA
regulations (which are comparable to SEC Rule 15c3-1 on net capital);
(2) The provisions of part 403 of the GSA regulations that
incorporate and modify SEC Rule 15c3-3 on reserves and custody of
securities;
(3) The provisions of parts 404 and 405 of the GSA regulations that
incorporate and modify SEC Rules 17a-3 through 17a-5, 17h-1T and 17h-
2T, on records and reports; and
(4) The provisions of part 404 of the GSA regulations that
incorporate and modify SEC Rule 17a-13 on quarterly security counts.
The temporary exemptions contained in this order are based on the
facts and circumstances presented in the request. These temporary
exemptions could
[[Page 43380]]
become unavailable if the facts or circumstances change such that the
representations in the request are no longer materially accurate. ICE
Credit must promptly notify Treasury in writing if any of the
information provided to obtain these temporary exemptions changes. If
an underlying representation were to no longer be accurate, the status
of existing positions in cleared CDS that reference government
securities would remain unchanged, but no new positions could be
established pursuant to the temporary exemptions unless approved by
Treasury.
IX. Paperwork Reduction Act
There is no new collection of information contained in this order,
and, therefore, the Paperwork Reduction Act does not apply.
Mary J. Miller,
Assistant Secretary for Financial Markets.
[FR Doc. 2011-18307 Filed 7-15-11; 4:15 pm]
BILLING CODE 4810-39-P