[Federal Register Volume 84, Number 167 (Wednesday, August 28, 2019)]
[Notices]
[Pages 45182-45184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18482]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86728; File No. SR-ICC-2019-009]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change, Security-
Based Swap Submission, or Advance Notice Relating to ICC's Treasury
Operations Policies and Procedures
August 22, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on
August 8, 2019, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission the proposed rule change, security-
based swap submission, or advance notice as described in Items I, II
and III below, which Items have been prepared by ICC. ICC filed the
proposed rule change pursuant Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ such that the proposed rule change was
immediately effective upon filing with the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change, security-based swap submission, or advance notice from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice
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
(``Rules'').
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission, or
Advance Notice
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, Security-Based Swap Submission, or
Advance Notice
(a) Purpose
ICC proposes to revise its Treasury Policy. Specifically, ICC
proposes minor changes to the Treasury Policy to more generally refer
to a data provider for the purposes of collateral valuation and to
promote uniform investment guidelines that are applicable to Euro-
denominated cash posted by Clearing Participants (``CPs'') for their
margin requirements related to client positions (``customer origin
cash'') and Euro-denominated Guaranty Fund and margin cash posted by
CPs (``house origin cash''). 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. The proposed changes are
described in detail as follows.
ICC proposes to more generally refer to a data provider for the
purposes of collateral valuation in the `Collateral Valuation' sub-
section. Currently, the Treasury Policy references, by name, a data
provider that ICC uses as a source for collateral valuation
information. ICC proposes to remove references to the specific data
provider and to more generally require ICC to use a reliable data
provider as a source for collateral valuation information. ICC does not
intend that the Treasury Policy list ICC service providers or control
the on-boarding or review of such data provider. Service providers are
subject to contractual arrangements entered into by authorized ICC
officers and, if deemed a critical vendor under the Operational Risk
Management Framework, governed by the Operational Risk Management
Framework that describes their review and approval.\5\
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\5\ See SR-ICC-2018-003 for more information regarding the
review and approval of critical vendors under the ICC Operational
Risk Management Framework.
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ICC proposes updates to the Euro investment guidelines appendix,
which is applicable to Euro-denominated customer origin and house
origin cash. The current Euro investment guidelines allow direct
investments in French and German sovereign debt securities having a
final maturity of no greater than 198 days but require that all such
investments with customer origin cash comply with any applicable
conditions and restrictions in Commodity Futures Trading Commission
(``CFTC'') Regulation 1.25,\6\ including any applicable exemptive
orders. As such, direct investments with customer origin cash are
limited to French and German sovereign debt securities having a final
maturity of no greater than 180 days in accordance with the exemptive
order that was issued by the CFTC (the ``Order'').\7\ ICC proposes to
update the Euro investment guidelines to restrict direct investments
with both customer origin and house origin cash to French and German
sovereign debt securities having a final maturity of no greater than
180 days in order to promote uniform Euro investment guidelines that
are applicable to customer origin and house origin cash.
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\6\ 17 CFR 1.25.
\7\ 83 FR 35241 (July 25, 2018).
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ICC has filed the proposed rule change for immediate effectiveness
and proposes that it will be operative on or about, but no sooner than,
September 10, 2019.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \8\ 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; 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),\9\ because ICC believes that the proposed rule change
will promote the prompt
[[Page 45183]]
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 more generally refer to
a reliable data provider for the purposes of collateral valuation and
to maintain uniformity across the Euro investment guidelines. Removing
reference to a specific data provider ensures that the documentation of
ICC's Treasury Policy remains up-to-date, clear, transparent, and
focused on articulating the policies and procedures used to support
ICC's treasury functions. ICC does not intend that the Treasury Policy
list specific ICC service providers. Additionally, restricting direct
investments with both customer origin and house origin cash to French
and German sovereign debt securities having a final maturity of no
greater than 180 days promotes uniform Euro investment guidelines in
the Treasury Policy and enhances compliance with the CFTC's Order.\10\
The CFTC's Order determined that 180 days or less was an appropriate
final maturity for direct investments in French and German sovereign
debt securities and, as such, ICC proposes that its Treasury Policy
conform with respect to both house origin and customer origin cash.
Thus, 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.\11\
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ Id.
\10\ 83 FR 35241 (July 25, 2018).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
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In addition, the proposed revisions to the ICC Treasury Policy are
consistent with the relevant requirements of Rule 17Ad-22.\12\ Rule
17Ad-22(b)(3) \13\ 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. The proposed changes promote the
reliable investment of assets in ICC's control with minimal risk,
including by generally requiring ICC to use a reliable data provider
for the purposes of collateral valuation and conforming ICC's Euro
investment guidelines with the CFTC's Order \14\ by limiting direct
investments to French and German sovereign debt securities having a
final maturity of 180 days or less with both house origin and customer
origin cash, thereby ensuring that ICC continues 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).\15\
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\12\ 17 CFR 240.17Ad-22.
\13\ 17 CFR 240.17Ad-22(b)(3).
\14\ 83 FR 35241 (July 25, 2018).
\15\ 17 CFR 240.17Ad-22(b)(3).
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Rule 17Ad-22(d)(3) \16\ 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 CFTC's Order \17\
determined that 180 days or less was an appropriate final maturity for
direct investments in French and German sovereign debt securities and
ICC proposes that its Treasury Policy conform with respect to both
house origin and customer origin cash. Such change does not expand the
universe of permitted investments under the Treasury Policy since the
current Euro investment guidelines already allow direct investments in
French and German sovereign debt securities having a final maturity of
180 days or less. As such, ICC believes that the proposed changes
enhance compliance with the CFTC's Order \18\ by promoting uniform Euro
investment guidelines and limiting direct investments with both
customer origin and house origin cash to French and German sovereign
debt securities having a final maturity of no greater than 180 days,
which will enhance 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).\19\
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\16\ 17 CFR 240.17Ad-22(d)(3).
\17\ 83 FR 35241 (July 25, 2018).
\18\ Id.
\19\ 17 CFR 240.17Ad-22(d)(3).
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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, Security-Based Swap Submission, or Advance Notice 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, Security-Based
Swap Submission, or Advance Notice and Timing for Commission Action
Because the foregoing proposed rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule
19b-4(f)(6) thereunder.
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, security-based swap submission, or advance notice 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-2019-009 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 45184]]
All submissions should refer to File Number SR-ICC-2019-009. 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, security-based
swap submission, or advance notice that are filed with the Commission,
and all written communications relating to the proposed rule change,
security-based swap submission, or advance notice 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 a.m. and 3 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-2019-009 and should be
submitted on or before September 18, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18482 Filed 8-27-19; 8:45 am]
BILLING CODE 8011-01-P