[Federal Register Volume 84, Number 225 (Thursday, November 21, 2019)]
[Notices]
[Pages 64379-64381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25206]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87549; File No. SR-ICC-2019-012]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to ICC's Treasury Operations
Policies and Procedures
November 15, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, 15 U.S.C. 78s(b)(1) and Rule 19b-4, 17 CFR 240.19b-4, notice is
hereby given that on November 1, 2019, ICE Clear Credit LLC (``ICC'')
filed with the Securities and Exchange 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.
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
ICC Treasury Operations Policies and Procedures (``Treasury Policy'').
These revisions do not require any changes to the ICC Clearing Rules
(the ``Rules'').
II. Clearing Agency'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,
security-based swap submission, or advance notice and discussed any
comments it received on the proposed rule change, security-based swap
submission, or advance notice. 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) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICC proposes to revise its Treasury Policy. Specifically, ICC
proposes clarification updates related to its use of a committed
repurchase (``repo'') facility, acceptable forms of United States
(``US'') Treasury collateral, and its collateral valuation process. ICC
believes that 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.
ICC proposes to make such changes effective following Commission
approval of the proposed rule change. The proposed revisions are
described in detail as follows.
ICC proposes amendments to the `Funds Management' section with
respect to its use of a committed repo facility. Namely, ICC proposes
to clarify that the committed repo facility can be used to generate
temporary liquidity through the sale and agreement to repurchase
securities pledged by ICC Clearing Participants (``CPs'') to satisfy
their Initial Margin (``IM'') and Guaranty Fund (``GF'') requirements.
ICC proposes to include that, when applicable, the facility can be used
to rehypothecate sovereign debt from overnight repo investments in the
event of a counterparty default. ICC also proposes to note that the
facility can be used to sell, with the agreement to repurchase,
sovereign debt securities that are held by ICC pursuant to direct
investments in such securities.
ICC proposes to update the `Custodial Assets' section regarding
acceptable forms of US Treasury collateral and ICC's collateral
valuation process. Under the Treasury Policy, acceptable forms of non-
cash collateral for IM and GF are limited to US Treasury securities.
ICC proposes to specify that Floating Rate Notes and STRIPS are not
acceptable forms of US Treasury collateral for IM and GF. ICC also
proposes to add language stating that, with respect to its collateral
valuation process, Euros that are used to cover a US Dollar denominated
product requirement will be subject to a haircut.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \1\ requires, among other things,
that the rules of a clearing agency be designed to
[[Page 64380]]
promote the prompt and accurate clearance and settlement of securities
transactions, and to the extent applicable, derivative agreements,
contracts and transactions; to assure the safeguarding of securities
and funds which are in the custody or control of the clearing agency or
for which it is responsible; and to comply with the provisions of the
Act and the rules and regulations thereunder. ICC believes that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to ICC, in particular,
to Section 17(A)(b)(3)(F),\2\ because ICC believes that the proposed
rule change will promote the prompt and accurate clearance and
settlement of securities transactions, derivatives agreements,
contracts, and transactions, and contribute to the safeguarding of
securities and funds associated with security-based swap transactions
in ICC's custody or control, or for which ICC is responsible. The
proposed changes allow ICC to provide additional clarity regarding its
use of the committed repo facility, acceptable forms of US Treasury
collateral, and its collateral valuation process. The proposed updates
ensure that the documentation of ICC's Treasury Policy remains up-to-
date, transparent, and focused on clearly articulating the policies and
procedures used to support ICC's treasury functions, which promotes the
prompt and accurate clearance and settlement of securities
transactions, derivatives agreements, contracts, and transactions and
contributes to the safeguarding of securities and funds which are in
the custody or control of ICC or for which it is responsible. As such,
the proposed rule change is designed to promote the prompt and accurate
clearance and settlement of securities transactions, derivatives
agreements, contracts, and transactions and to contribute to the
safeguarding of securities and funds associated with security-based
swap transactions in ICC's custody or control, or for which ICC is
responsible within the meaning of Section 17A(b)(3)(F) of the Act.\3\
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\1\ 15 U.S.C. 78q-1(b)(3)(F).
\2\ Id.
\3\ Id.
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In addition, the proposed rule change is consistent with the
relevant requirements of Rule 17Ad-22.\4\ Rule 17Ad-22(b)(3) \5\
requires ICC to establish, implement, maintain and enforce written
policies and procedures reasonably designed to maintain sufficient
financial resources to withstand, at a minimum, a default by the two CP
families to which it has the largest exposures in extreme but plausible
market conditions. ICC believes that the proposed changes enhance its
ability to manage its financial resources, including by more clearly
articulating details related to the use of the committed repo facility,
acceptable forms of US Treasury collateral, and the collateral
valuation process. Specifically, the additional details relating to
ICC's use of a committed repo facility clarify, among other things,
that when applicable, the facility can be used to rehypothecate
sovereign debt from overnight repo investments in the event of a
counterparty default. The proposed changes also identify Floating Rate
Notes and STRIPS as unacceptable forms of US Treasury collateral for IM
and GF and, with respect to the collateral valuation process, specify
that Euros that are used to cover a US Dollar denominated product
requirement will be subject to a haircut. Such proposed changes
strengthen the documentation of ICC's treasury operations, which
supports ICC's ability to maintain sufficient financial resources to
withstand, at a minimum, a default by the two CP families to which it
has the largest exposures in extreme but plausible market conditions,
consistent with the requirements of Rule 17Ad-22(b)(3).\6\
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\4\ 17 CFR 240.17Ad-22.
\5\ 17 CFR 240.17Ad-22(b)(3).
\6\ Id.
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Rule 17Ad-22(d)(3) \7\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to hold assets in a manner that minimizes risk of loss or of
delay in its access to them and to invest assets in instruments with
minimal credit, market, and liquidity risks. The proposed changes
strengthen ICC's ability to safeguard assets and limit the potential
for loss or delay in access to such assets by ensuring that ICC has
clear and comprehensive procedures for the use of the committed repo
facility, transparent and well-documented policies regarding acceptable
types of US Treasury collateral, and clear and effective procedures for
collateral valuation. Moreover, ICC believes that having policies and
procedures that clearly and accurately document ICC's treasury
functions are an important component to the effectiveness of ICC's
treasury operations, which promote ICC's ability to hold assets in a
manner that minimizes risk of loss or of delay in its access to them
and to invest assets in instruments with minimal credit, market, and
liquidity risks. Such changes are therefore reasonably designed to meet
the requirements of Rule 17Ad-22(d)(3).\8\
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\7\ 17 CFR 240.17Ad-22(d)(3).
\8\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed changes to
ICC's Treasury Policy will apply uniformly across all market
participants. Therefore, ICC does not believe the proposed rule change
imposes any burden on competition that is inappropriate in furtherance
of the purposes of the Act.
(C) Clearing Agency'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.
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-2019-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
[[Page 64381]]
All submissions should refer to File Number SR-ICC-2019-012. 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 website (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 website 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 website at https://www.theice.com/clear-credit/regulation.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICC-2019-012 and should be
submitted on or before December 12, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25206 Filed 11-20-19; 8:45 am]
BILLING CODE 8011-01-P