[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

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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