[Federal Register Volume 80, Number 15 (Friday, January 23, 2015)]
[Notices]
[Pages 3691-3693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01070]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74084; File No. SR-ICC-2015-002]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change To Revise the ICC Treasury Operations
Policies and Procedures
January 16, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that
on January 6, 2015, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared primarily by ICC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to revise the ICC
Treasury Policies and Procedures to provide for the use of a Federal
Reserve Account, to provide for the use of a committed repo facility,
and to provide for engagement of outside investment managers to invest
guaranty fund and margin cash pursuant to ICC's USD and Euro investment
guidelines. These revisions do not require any changes to the ICC
Clearing Rules.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. ICC has prepared summaries, set forth in sections A, B
and C below, of the most significant aspects of these statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed revisions to ICC's Treasury Operations Policies and
Procedures are intended to provide for the use of a Federal Reserve
Account, to provide for the use of a committed repo facility, and to
provide for USD and Euro investment guidelines for use by outside
investment managers.
ICC believes such revisions will facilitate the prompt and accurate
clearance and settlement of securities transactions and derivative
agreements, contracts, and transactions for which it is responsible.
The proposed revisions are described in detail as follows.
ICC has revised its Treasury Operations Policies and Procedures to
demonstrate how ICC would utilize a Federal Reserve Account for cash
and collateral management. ICC has applied for a Federal Reserve
Account to hold both USD cash and US Treasuries. In its application,
ICC requested separate accounts for house origin funds and customer
origin funds. Should ICC be approved for a single account origin, ICC
will utilize the Federal Reserve Accounts to hold house collateral, and
customer collateral will continue to be held in commercial banks.
Should ICC be approved for an additional account origin, ICC will
utilize the second origin to hold customer collateral at the Federal
Reserve. With respect to the potential utilization of a Federal Reserve
cash Account, ICC plans to use this account as a depository account, in
which cash will be consolidated on a daily basis and held overnight.
ICC will continue using its commercial bank accounts for Clearing
Participant money movements, and the net excess/deficit will be
deposited to/withdrawn from the Federal Reserve cash Account as
necessary. With respect to potential utilization of a Federal Reserve
securities Account, ICC would use this account as a custody account to
hold US Treasuries deposited by Clearing Participants with ICC's
commercial banks.
Additionally, ICC has revised its Treasury Operations Policies and
Procedures to provide for use of a committed repurchase (``repo'')
facility. ICC has established a committed repo facility that will allow
ICC to consider US Treasury securities deposited at ICC as an
additional qualifying liquidity resource.\3\ The facility can be used
to convert US Treasuries into cash when the sale of pledged securities
needed for liquidity cannot be settled on a timely or same-day basis.
Specifically, the facility can be used to generate temporary liquidity
through the sale and agreement to repurchase securities pledged by ICC
Clearing Participants to satisfy their Initial Margin and Guaranty
[[Page 3692]]
Fund requirements. The facility will include counterparties that are
banks and/or broker dealers (which may include ICC Clearing
Participants and/or their affiliates) that each provide a committed
repo line to ICC. Committed repo will be subject to a haircut which
will be the greater of 5% or the haircut that central banks employ for
repo transactions using the same or similar purchased securities.
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\3\ As defined under Commodity Futures Trading Commission
Regulation 39.33(c).
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The committed repo facility can be used on an open or overnight
basis. The open repo will be closed as soon as the ICC Treasury
Department (``ICC Treasury'') can facilitate the sale and settlement of
the securities involved in the repo transaction. USD repo is settled
delivery versus payment (``DVP'') on a bilateral basis. In order to
initiate a committed repo transaction, ICC Treasury can send an email
to the counterparty with a list of the securities that will be
delivered. The counterparty will reply confirming the trade and
providing the ``purchase amount'' of the repo transaction. The purchase
amount will be equal to the mark-to-market (``MTM'') of the securities
less the haircut. The repo details will then be sent to ICC's custodian
for settlement. ICC Treasury will monitor bank activity to ensure
settlement is complete. Once ICC Treasury has arranged for the ultimate
sale of the securities involved in the repo transaction, it will close-
out the repo transaction(s).
Finally, ICC has revised its Treasury Operations Policies and
Procedures to provide for the engagement of outside investment managers
to invest guaranty fund and margin cash pursuant to ICC's USD and Euro
investment guidelines. ICC's current investment guidelines have been
extended to apply to outside investment managers, and such investment
guidelines are set forth in in the ICC Treasury Operations Policies and
Procedures. In general ICC's cash investment guidelines provide for the
investment of cash in overnight reverse repo with high quality
sovereign debt as collateral, and such guidelines apply to the
investment of both USD and Euro cash. The investment guidelines provide
that if the investment manager cannot place 100% of the allocated cash
in overnight reverse repo, backup investments will be in term reverse
repo and direct investment in high quality sovereign debt. With respect
to Euro cash, investment in reverse repo transactions and non-US
sovereign debt will be utilized only with respect to house origin cash,
and shall not be utilized with respect to customer origin cash pursuant
to Commodity Futures Trading Commission regulations. ICC's USD
investment guidelines provide for use by outside investment managers
with respect to USD cash that is not otherwise invested pursuant to the
ICC Treasury Operations Policies and Procedures. These revisions to the
Treasury Operations Policies and Procedures do not require any
operational changes.
Section 17A(b)(3)(F) of the Act \4\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions and to comply with the provisions of the Act and the rules
and regulations thereunder. ICC believes that the proposed revisions to
the ICC Treasury Operations Policies and Procedures are consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to ICC, in particular, to Section 17A(b)(3)(F),\5\ because
ICC believes that the proposed rule change will facilitate the prompt
and accurate settlement of swaps and contribute to the safeguarding of
securities and funds associated with swap transactions which are in the
custody or control of ICC or for which it is responsible. The changes
to provide for the use of a committed repo facility are designed to
enhance ICC's liquidity resources. Further, the changes to provide for
the use of a Federal Reserve Account and to provide for engagement of
outside investment managers to invest guaranty fund and margin cash
pursuant to ICC's USD and Euro investment guidelines are designed to
further ensure the reliable investment of assets in ICC's control with
minimal risk. As such, the proposed rule change will facilitate the
prompt and accurate settlement of swaps and contribute to the
safeguarding of customer funds and securities within the control of ICC
within the meaning of Section 17A(b)(3)(F) \6\ of the Act.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ Id.
\6\ Id.
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In addition, the proposed revisions to the ICC Treasury Operations
Policies and Procedures are consistent with the relevant requirements
of Rule 17Ad-22.\7\ In particular, the use of a Federal Reserve Account
and the engagement of outside investment managers to invest guaranty
fund and margin cash pursuant to ICC's USD and Euro investment
guidelines will enhance ICC's ability to hold assets in a manner that
minimizes risk of loss or of delay in its access to such assets and
will result in investment arrangements with minimal credit, market and
liquidity risks. Furthermore, engagement of an outside investment
manager will facilitate the securitization of guaranty fund and margin
cash held by ICC. Such changes are therefore reasonably designed to
meet the requirements of Rule 17Ad-22(d)(3).\8\ Additionally, the use
of a committed repo facility will further ensure that ICC maintains
sufficient financial resources at all times to meet the requirements
set forth in Rule 17Ad-22(b)(3).\9\
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\7\ 17 CFR 240.17Ad-22.
\8\ 17 CFR 240.17Ad-22(d)(3).
\9\ 17 CFR 240.17Ad-22(b)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICC does not believe the proposed revisions would have any impact,
or impose any burden, on competition. The revisions to ICC's Treasury
Operations Policies and Procedures to provide for the use of a Federal
Reserve Account, to provide for the use of a committed repo facility,
and to provide for engagement of outside investment managers to invest
guaranty fund and margin cash pursuant to ICC's USD and Euro investment
guidelines apply uniformly across all Clearing Participants. Therefore,
ICC does not believe the proposed revisions impose any burden on
competition that is inappropriate in furtherance of the purposes of the
Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
[[Page 3693]]
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ICC-2015-002 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICC-2015-002. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filings will also be available
for inspection and copying at the principal office of ICE Clear Credit
and on ICE Clear Credit's Web site at https://www.theice.com/clear-credit/regulation.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-ICC-2015-002
and should be submitted on or before February 13, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-01070 Filed 1-22-15; 8:45 am]
BILLING CODE 8011-01-P