[Federal Register Volume 82, Number 240 (Friday, December 15, 2017)]
[Notices]
[Pages 59586-59591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27060]
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COMMODITY FUTURES TRADING COMMISSION
Proposed Order and Request for Comment on Application for
Exemption From Certain Provisions of the Commodity Exchange Act
Regarding Investment of Customer Funds and From Certain Related
Commission Regulations
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed order and request for comment.
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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is requesting comment on a proposed exemption issued in
response to an application from ICE Clear Credit LLC, ICE Clear US,
Inc., and ICE Clear Europe Limited (collectively, ``the ICE DCOs'' or
``the Petitioners'') to grant an exemption to permit the investment of
futures and swap customer funds in certain categories of euro-
denominated sovereign debt. The ICE DCOs are also requesting exemptive
relief to expand
[[Page 59587]]
the universe of counterparties and depositories they may use in
connection with these investments given the structure of the market for
repurchase agreements in euro-denominated sovereign debt.
DATES: Comments must be received on or before January 16, 2018.
ADDRESSES: You may submit comments by any of the following methods:
CFTC website: http://comments.cftc.gov. Follow the
instructions for submitting comments through the Comments Online
process on the website.
Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
Hand Delivery/Courier: Same as Mail, above.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Please submit your comments using only one of these methods.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that you believe is exempt from disclosure under the
Freedom of Information Act (``FOIA''), a petition for confidential
treatment of the exempt information may be submitted according to the
established procedures in Commission Regulation 145.9, 17 CFR 145.9.
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of this action will be retained in the public comment file
and will be considered as required under the Administrative Procedure
Act and other applicable laws, and may be accessible under the FOIA.
FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Deputy Director,
(202) 418-5096, [email protected], Division of Clearing and Risk,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, DC 20581; or Tad Polley, Associate Director,
(312) 596-0551, [email protected], or Scott Sloan, Attorney-Advisor,
(312) 596-0708, [email protected], Division of Clearing and Risk,
Commodity Futures Trading Commission, 525 West Monroe Street, Chicago,
Illinois 60661.
SUPPLEMENTARY INFORMATION:
I. Background
By application dated June 22, 2017, the Petitioners, all registered
derivatives clearing organizations (``DCOs''), requested an exemptive
order under section 4(c) of the Commodity Exchange Act (``CEA'' or
``Act'') permitting the ICE DCOs to invest futures and cleared swap
customer funds in certain categories of euro-denominated sovereign
debt.
Section 4d of the Act \1\ and Commission Regulation 1.25(a) \2\ set
out the permitted investments in which DCOs may invest customer
funds.\3\ Section 4d limits investments of customer money to
obligations of the United States (``U.S. Government Securities''),
general obligations of any State or of any political subdivision
thereof, and obligations fully guaranteed as to principal and interest
by the United States.\4\ Regulation 1.25 expands the list of permitted
investments but does not permit investment of customer funds in foreign
sovereign debt.\5\
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\1\ 7 U.S.C. 6d.
\2\ 17 CFR 1.25(a) (2017).
\3\ Although Regulation 1.25 by its terms applies only to
futures customer funds, Regulation 22.3(d) requires that a DCO
investing cleared swap customer funds comply with the requirements
of Regulation 1.25.
\4\ See 7 U.S.C. 6d(a)(2) (futures), (f)(4) (cleared swaps).
\5\ Regulation 1.25 permits investment of customer funds in: (i)
Obligations of the United States and obligations fully guaranteed as
to principal and interest by the United States (U.S. government
securities); (ii) General obligations of any State or of any
political subdivision thereof (municipal securities); (iii)
Obligations of any United States government corporation or
enterprise sponsored by the United States government (U.S. agency
obligations); (iv) Certificates of deposit issued by a bank
(certificates of deposit) as defined in section 3(a)(6) of the
Securities Exchange Act of 1934, or a domestic branch of a foreign
bank that carries deposits insured by the Federal Deposit Insurance
Corporation; (v) Commercial paper fully guaranteed as to principal
and interest by the United States under the Temporary Liquidity
Guarantee Program as administered by the Federal Deposit Insurance
Corporation (commercial paper); (vi) Corporate notes or bonds fully
guaranteed as to principal and interest by the United States under
the Temporary Liquidity Guarantee Program as administered by the
Federal Deposit Insurance Corporation (corporate notes or bonds);
and (vii) Interests in money market mutual funds.
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Regulation 1.25 previously included foreign sovereign debt as a
permitted investment for customer funds.\6\ In 2011, the Commission
removed this option from Regulation 1.25, but also acknowledged that
``the safety of sovereign debt issuances of one country may vary
greatly from those of another,'' and stated that it was amenable to
considering requests for section 4(c) exemptions from this
restriction.\7\ Specifically, the Commission stated that it would
consider permitting foreign sovereign debt investments (1) to the
extent that the petitioner has balances in segregated accounts owed to
customers or clearing member futures commission merchants in that
country's currency and (2) to the extent that the sovereign debt serves
to preserve principal and maintain liquidity of customer funds as
required for all other investments of customer funds under Regulation
1.25.\8\
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\6\ See 17 CFR 1.25(a) (2005).
\7\ Investment of Customer Funds and Funds Held in an Account
for Foreign Futures and Foreign Options Transactions, 76 FR 78776,
78782 (Dec. 19, 2011).
\8\ Id.
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In connection with their proposal to invest customer funds in
foreign sovereign debt, the ICE DCOs have also requested an exemption
from Regulations 1.25(d)(2) and (7). Regulation 1.25(d)(2) limits the
counterparties with which a DCO can enter into a repurchase agreement
involving customer funds to a bank as defined in section 3(a)(6) of the
Securities Exchange Act of 1934, a domestic branch of a foreign bank
insured by the Federal Deposit Insurance Corporation, a securities
broker or dealer, or a government securities broker or government
securities dealer registered with the Securities and Exchange
Commission or which has filed notice pursuant to section 15C(a) of the
Government Securities Act of 1986. Regulation 1.25(d)(7) requires a DCO
to hold the securities transferred to the DCO under a repurchase
agreement in a safekeeping account with a bank as referred to in
Regulation 1.25(d)(2), a Federal Reserve Bank, a DCO, or the Depository
Trust Company in an account that complies with the requirements of
Regulation 1.26.
II. The ICE DCOs' Petition
The ICE DCOs specifically seek to invest euro-denominated customer
funds in sovereign debt issued by the French Republic and the Federal
Republic of Germany (``Designated Foreign Sovereign Debt'') through
both direct investment and repurchase agreements.\9\ In the petition,
the ICE DCOs argue that French and German sovereign debt is comparable
to U.S. Government Securities in terms of
[[Page 59588]]
creditworthiness, liquidity, and volatility. The Petitioners note that
facing the credit risk of these financially stable sovereigns is
preferable from a risk management perspective to holding euro at a
commercial bank. In the case of investments through reverse repurchase
agreements (as opposed to direct investments), the ICE DCOs still face
a commercial counterparty but receive the additional benefit of
receiving securities as collateral against that counterparty's credit
risk. The ICE DCOs have also represented that in the event a securities
custodian enters insolvency proceedings, they would have a claim to
specific securities rather than a general claim against the assets of
the custodian.
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\9\ A copy of the petition is available on the Commission's
website at http://www.cftc.gov/idc/groups/public/@requestsandactions/documents/ifdocs/icedcos4cappl6-22-17.pdf.
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The Petitioners further request an exemption from Regulation
1.25(d)(2) that would permit them to enter into reverse repurchase
agreements with certain foreign banks, certain regulated securities
dealers, or the European Central Bank and the central banks of Germany
and France.\10\ The ICE DCOs have represented that the principal
participants in the European sovereign debt repurchase markets are non-
U.S. banks, non-U.S. securities dealers, and foreign branches of U.S.
banks. As a result, the counterparty requirements under Regulation
1.25(d)(2) would significantly constrain the use of euro-denominated
sovereign debt repurchase agreements.
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\10\ The ICE DCOs have indicated they may not currently be able
to enter into repurchase agreements with these central banks.
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The ICE DCOs also request an exemption from Regulation 1.25(d)(7)
that would permit them to hold the securities purchased through reverse
repurchase agreements in a safekeeping account with a non-U.S. bank.
The ICE DCOs seek this exemption based on their representation that it
is impractical and inefficient to hold such securities at a U.S.
custodian. Rather than seeking an open-ended exemption from Regulation
1.25(d)(7), the ICE DCOs propose that they be permitted to only use a
foreign bank that qualifies as a depository under the requirements of
Regulation 1.49.
III. Section 4(c) of the Act
Section 4(c)(1) of the Act empowers the Commission to ``promote
responsible economic or financial innovation and fair competition'' by
exempting any transaction or class of transactions (including any
person or class of persons offering, entering into, rendering advice or
rendering other services with respect to, the agreement, contract, or
transaction), from any of the provisions of the Act, subject to
exceptions not relevant here.\11\ In enacting section 4(c), Congress
noted that its goal ``is to give the Commission a means of providing
certainty and stability to existing and emerging markets so that
financial innovation and market development can proceed in an effective
and competitive manner''.\12\ The Commission may grant such an
exemption by rule, regulation, or order, after notice and opportunity
for hearing, and may do so on application of any person or on its own
initiative.
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\11\ 7 U.S.C. 6(c)(1).
\12\ House Conf. Report No. 102-978, 1992 U.S.C.C.A.N. 3179,
3213.
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Section 4(c)(2) of the Act provides that the Commission may grant
exemptions under section 4(c)(1) only when it determines that the
requirements for which an exemption is being provided should not be
applied to the agreements, contracts, or transactions at issue; that
the exemption is consistent with the public interest and the purposes
of the Act; that the agreements, contracts, or transactions will be
entered into solely between appropriate persons; and that the exemption
will not have a material adverse effect on the ability of the
Commission or any contract market or derivatives transaction execution
facility to discharge its regulatory or self-regulatory
responsibilities under the Act.
IV. Order
A. Discussion of the Proposed Order
The Commission is proposing to permit the ICE DCOs to invest
futures and cleared swap customer funds in sovereign debt issued by the
French Republic and the Federal Republic of Germany, through either
direct investment or repurchase agreements, pursuant to an exemption
under section 4(c) of the Act. The Commission is proposing the order
below, which includes certain conditions on the permitted investments,
in response to the ICE DCOs' argument that permitting investment in the
Designated Foreign Sovereign Debt furthers responsible risk management.
Based on the analysis below, the Commission has preliminarily
determined that the exemption provided in the proposed order meets the
requirements of section 4(c)(2) of the Act, including in that it is
consistent with the public interest and the purposes of the Act, and in
that it will not have a material adverse effect on the ability of the
Commission to discharge its regulatory responsibilities.
Through their petition, the ICE DCOs have demonstrated that the
Designated Foreign Sovereign Debt has credit, liquidity, and volatility
characteristics that are comparable to U.S. Government Securities,
which are permitted investments under the Act and Regulation 1.25. For
example, as evidence of the creditworthiness of France and Germany, the
ICE DCOs provided data demonstrating that credit default swap spreads
of France and Germany have historically been similar to those of the
United States. To demonstrate the liquidity of the markets, the ICE
DCOs point to, for example, the substantial amount of outstanding
marketable French and German debt and the daily transaction value of
the repo markets for their debt. And with respect to volatility, the
ICE DCOs provided data on daily changes to sovereign debt yields
demonstrating that the price stability of French and German debt is
comparable to that of U.S. Government Securities. The ICE DCOs have
thus argued that the Designated Sovereign Debt serves to preserve
principle and maintain liquidity of customer funds as is required for
investments permitted under Regulation 1.25. To ensure that permitted
investments are limited to those with an appropriate risk profile, the
proposed order limits investments in Designated Foreign Sovereign Debt
to instruments of a shorter duration, as is discussed below.
Further, the ICE DCOs have demonstrated that investing in the
Designated Foreign Sovereign Debt poses less risk to customer funds
than the current alternative of holding the funds at a commercial bank,
arguing that exposure to high-quality sovereign debt is preferable to
facing the credit risk of commercial banks through unsecured bank
demand deposit accounts. And finally, the Commission does not believe
that any of the section 4(c)(2) exceptions would prevent a grant of the
requested exemption.
The Commission is also proposing certain conditions to the
exemption, including that the ICE DCOs may only use customer euro cash
to invest in the Designated Foreign Sovereign Debt. This restriction
was included in Regulation 1.25 \13\ when the rule permitted the
investment of customer funds in foreign sovereign debt, and the
Commission believes it is still an appropriate
[[Page 59589]]
restriction on the amount that may be invested in these instruments.
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\13\ See 17 CFR 1.25(b)(4)(D) (2005) (providing that sovereign
debt is subject to the following limits: A futures commission
merchant may invest in the sovereign debt of a country to the extent
it has balances in segregated accounts owed to its customers
denominated in that country's currency; a DCO may invest in the
sovereign debt of a country to the extent it has balances in
segregated accounts owed to its clearing member futures commission
merchants denominated in that country's currency).
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The Commission is further proposing to permit the ICE DCOs to
invest in the Designated Foreign Sovereign Debt only so long as the
two-year credit default spread of the issuing sovereign is 45 basis
points (``BPS'') or less. Because the Commission does not intend in
this proposed order to expand the universe of permitted investments
beyond instruments with a risk profile similar to those that are
currently permitted, the Commission believes it is appropriate to use
U.S. Government Securities as a benchmark to confine permitted
investments in foreign sovereign debt. The Commission is proposing the
cap of 45 BPS based on a historical analysis of the two-year credit
default spread of the United States (``U.S. Spread''). Forty-five BPS
is approximately two standard deviations above the mean U.S. Spread
over the past eight years and represents a risk level that the U.S.
Spread has exceeded approximately 5% of the time over that period.\14\
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\14\ The Commission reviewed the daily U.S. Spread from July 3,
2009 to July 3, 2017. Over this time period, the U.S. Spread had a
mean of approximately 26.5 BPS and a standard deviation of
approximately 9.72 BPS. Over this same period, the two-year German
spread exceeded 45 BPS approximately 6% of the time, and the two-
year French spread exceeded 45 BPS approximately 25% of the time.
Neither the German nor the French two-year spread has exceeded 45
BPS since September 2012.
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Under the proposal, if the spread exceeds 45 BPS, the ICE DCOs
would not be permitted to make new investments in the relevant debt.
They would not, however, be required to immediately divest all current
investments, due to risks associated with selling assets into a
potentially volatile market. The Commission believes that prohibiting
new investments, together with the length to maturity condition
discussed immediately below, will sufficiently protect customer funds
in the event that a country's Designated Foreign Sovereign Debt were to
exceed the 45 BPS spread limit.
The Commission is also proposing to limit the length to maturity of
direct investments in Designated Foreign Sovereign Debt, to limit
permitted investments to those with a lower risk profile. Specifically,
the proposed order requires each of the ICE DCOs to ensure that the
dollar-weighted average of the time-to-maturity of their portfolio of
direct investments in each type of Designated Foreign Sovereign Debt
does not exceed 60 days. This restriction is consistent with Securities
and Exchange Commission requirements for money market mutual funds \15\
and ensures that the ICE DCOs will not hold Designated Foreign
Sovereign Debt investments on a long-term basis, and that the
investments will mature relatively quickly, providing the ICE DCOs with
access to euro cash. The Commission believes that the liquidity timing
needs of money market mutual funds are an appropriate analogue to those
of a DCO in this instance and that the 60-day time-to-maturity limit
will further limit the risks of investments in Designated Foreign
Sovereign Debt.
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\15\ See 17 CFR 270.2a-7.
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To provide the ICE DCOs with the ability to invest customer funds
in the Designated Foreign Sovereign Debt, the Commission is also
proposing to exempt the ICE DCOs from the counterparty and depository
requirements of Regulation 1.25(d)(2) and (7), subject to conditions.
As a practical matter, complying with these requirements would severely
restrict the ICE DCOs' ability to enter into repurchase agreements for
Designated Foreign Sovereign Debt. As a result, the Commission proposes
to exempt the ICE DCOs from the counterparty restrictions of Regulation
1.25(d)(2), subject to the condition that counterparties be limited to
certain categories that are intended to limit the risk associated with
reverse repurchase transactions. Similarly, the Commission is proposing
to condition the ICE DCOs' exemption from Regulation 1.25(d)(7) on its
use of depositories that qualify as permitted depositories under
Regulation 1.49. This approach is designed to ensure that the
counterparties and depositories used by the ICE DCOs will be regulated
entities comparable to those currently permitted under Regulation
1.25(d)(2) and (7).
B. Proposed Order
The Commission proposes an exemptive order that includes the
following substantive provisions:
(1) The Commission, pursuant to its authority under section 4(c) of
the Commodity Exchange Act (``Act'') and subject to the conditions
below, hereby grants registered derivatives clearing organizations
(``DCOs'') ICE Clear Credit LLC, ICE Clear US Inc., and ICE Clear
Europe Limited (``ICE DCOs'') a limited exemption to section 4d of the
Act and to Commission Regulation 1.25(a) to permit the ICE DCOs to
invest euro-denominated futures and cleared swap customer funds in
euro-denominated sovereign debt issued by the French Republic and the
Federal Republic of Germany (``Designated Foreign Sovereign Debt'').
(2) The Commission, subject to the conditions below, additionally
grants:
(a) A limited exemption to Commission Regulation 1.25(d)(2) to
permit the ICE DCOs to use customer funds to enter into repurchase
agreements with foreign banks and foreign securities brokers or
dealers; and
(b) A limited exemption to Commission Regulation 1.25(d)(7) to
permit the ICE DCOs to hold securities purchased under a repurchase
agreement in a safekeeping account at a foreign bank.
(3) This order is subject to the following conditions:
(a) Investments of customer funds in Designated Foreign Sovereign
Debt by each ICE DCO must be limited to investments made with euro
customer cash.
(b) The ICE DCOs may only invest customer funds in Designated
Foreign Sovereign Debt if the two-year credit default spread of the
issuing sovereign is 45 basis points or less.
(c) The dollar-weighted average of the time-to-maturity of each ICE
DCO's portfolio of direct investments in each sovereign's Designated
Foreign Sovereign Debt may not exceed 60 days. Direct investment refers
to purchases of Designated Foreign Sovereign Debt unaccompanied by a
contemporaneous agreement to resell the securities.
(d) The ICE DCOs may use customer funds to enter into repurchase
agreements for Designated Foreign Sovereign Debt with a counterparty
that does not meet the requirements of Commission Regulation 1.25(d)(2)
only if the counterparty is:
(i) A foreign bank that qualifies as a permitted depository under
Commission Regulation 1.49(d)(3) and that is located in a money center
country (as defined in Commission Regulation 1.49(a)(1)) or in another
jurisdiction that has adopted the euro as its currency;
(ii) A securities dealer located in a money center country as
defined in Commission Regulation 1.49(a)(1) that is regulated by a
national financial regulator such as the UK Prudential Regulation
Authority or Financial Conduct Authority, the German Bundesanstalt
f[uuml]r Finanzdienstleistungsaufsicht (BaFin), the French
Autorit[eacute] Des March[eacute]s Financiers (AMF) or Autorit[eacute]
de Contr[ocirc]le Prudentiel et de R[eacute]solution (ACPR), or the
Italian Commissione Nazionale per le Societ[agrave] e la Borsa
(CONSOB); or
(iii) The European Central Bank, the Deutsche Bundesbank, or the
Banque de France.
(e) The ICE DCOs may hold customer securities purchased under a
repurchase
[[Page 59590]]
agreement with a depository that does not meet the requirements of
Commission Regulation 1.25(d)(7) only if the depository meets the
location and qualification requirements contained in Commission
Regulation 1.49(c) and (d) and if the account complies with the
requirements of Commission Regulation 1.26.
(4) The ICE DCOs must continue to comply with all other
requirements in Commission Regulation 1.25, including but not limited
to the counterparty concentration limits in Commission Regulation
1.25(b)(3)(v), and other applicable Commission regulations.
V. Request for Comment
The Commission requests comment on all aspects of Petitioners'
exemption request, including the specific provisions and issues
highlighted in the discussion above and the issues presented in this
section. For each comment submitted, please provide a detailed
rationale supporting the response.
The purposes of the CEA include ``promot[ing] responsible
innovation and fair competition among boards of trade, other markets,
and market participants''.\16\ It may be consistent with these and the
other purposes of the CEA, and with the public interest, to grant the
exemption requested by the Petitioners. Accordingly, the Commission is
requesting comment as to whether an exemption from the requirements of
the CEA should be granted in this context. The Commission also is
requesting comment as to whether this exemption would affect its
ability to discharge its regulatory responsibilities under the CEA.
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\16\ Section 3(b) of the CEA, 7 U.S.C. 5(b). See also Section
4(c)(1) of the CEA, 7 U.S.C. 6(c)(1) (purpose of exemptions is ``to
promote responsible economic or financial innovation and fair
competition'').
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VI. Related Matters
A. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA'') imposes certain requirements
on federal agencies (including the Commission) in connection with their
conducting or sponsoring any collection of information as defined by
the PRA. This exemptive order does not involve a collection of
information. Accordingly, the PRA does not apply.
B. Cost-Benefit Analysis
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its action before issuing an order under the CEA.
By its terms, section 15(a) does not require the Commission to quantify
the costs and benefits of an order or to determine whether the benefits
of the order outweigh its costs. Rather, section 15(a) simply requires
the Commission to ``consider the costs and benefits'' of its action.
1. Baseline for the Proposal
The Commission's proposed baseline for consideration of the costs
and benefits of the proposed exemptive order are the costs and benefits
that the ICE DCOs and the public would face if the Commission does not
grant the order, or in other words, the status quo. In that scenario,
the ICE DCOs would be limited to investing customer funds in the
instruments listed in Regulation 1.25.
2. Costs and Benefits
The costs and benefits of the proposed order are not presently
susceptible to meaningful quantification. Therefore, the Commission
discusses proposed costs and benefits in qualitative terms.
The Commission does not believe granting the exemption would impose
additional costs on the ICE DCOs. The proposed order would permit but
not require the Petitioners to invest customer funds in Designated
Foreign Sovereign Debt. The ICE DCOs may therefore choose whether to
accept any costs and benefits of an investment. The Commission also
does not expect the proposed order to impose additional costs on other
market participants or the public, which do not face any direct costs
from the proposed order. While other market participants or the public
could potentially face costs from riskier investment activity leading
to financial instability at an ICE DCO, the flexibility to hold
customer funds in Designated Foreign Sovereign Debt rather than in euro
cash at a commercial bank provides risk management benefits as
described above.
The Commission believes that the ICE DCOs would benefit from the
proposed order. The exemption would provide the ICE DCOs additional
flexibility in how they manage and hold customer funds and would allow
them to improve the risk management of their customer accounts.
Further, as described above, it is safer from a risk management
perspective to hold Foreign Sovereign Debt in a safekeeping account
than to hold euro cash at a commercial bank. Therefore, market
participants and the public may also benefit from the proposed
exemption.
3. Section 15(a) Factors
Section 15(a) of the CEA further specifies that costs and benefits
shall be evaluated in light of five broad areas of market and public
concern: Protection of market participants and the public; efficiency,
competitiveness, and financial integrity of futures markets; price
discovery; sound risk management practices; and other public interest
considerations. The Commission could in its discretion give greater
weight to any one of the five enumerated areas and could in its
discretion determine that, notwithstanding its costs, a particular
order was necessary or appropriate to protect the public interest or to
effectuate any of the provisions or to accomplish any of the purposes
of the CEA. The Commission is considering the costs and benefits of
this exemptive order in light of the specific provisions of section
15(a) of the CEA, as follows:
1. Protection of market participants and the public. As described
above, investing in the Designated Foreign Sovereign Debt as requested
by the Petitioners can provide risk management benefits relative to the
current alternative of holding euro collateral in a commercial bank.
Granting the exemption thus serves to protect market participants and
the public.
2. Efficiency, competition, and financial integrity. Granting the
exemption may increase efficiency by providing the Petitioners
additional flexibility in how they manage customer funds. Making the
investments permitted by the proposed order is elective, within the
discretion of the ICE DCOs, and thus does not impose additional costs.
Further, as discussed above, the ICE DCOs plan to exercise prudent risk
management by investing in the Designated Foreign Sovereign Debt, which
may enhance the financial integrity of the ICE DCOs.
3. Price discovery. The exemption is unlikely to impact price
discovery.
4. Sound risk management practices. As described above, the ICE
DCOs' plan to invest customer funds in the Designated Foreign Sovereign
Debt is intended to advance sound risk management practices.
5. Other public interest considerations. The Commission believes
that the relevant cost-benefit considerations are captured in the four
factors above.
The Commission invites public comment on its application of the
cost-benefit provisions of section 15.
[[Page 59591]]
Issued in Washington, DC, on December 12, 2017, by the
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Appendix to Proposed Order and Request for Comment on Application for
Exemption From Certain Provisions of the Commodity Exchange Act
Regarding Investment of Customer Funds and From Certain Related
Commission Regulations--Commission Voting Summary
On this matter, Chairman Giancarlo and Commissioners Quintenz
and Behnam voted in the affirmative. No Commissioner voted in the
negative.
[FR Doc. 2017-27060 Filed 12-14-17; 8:45 am]
BILLING CODE 6351-01-P