
[Federal Register Volume 77, Number 79 (Tuesday, April 24, 2012)]
[Notices]
[Pages 24546-24547]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-9769]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66825; File No. SR-ICC-2012-01]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule To Provide That One Hundred Percent (100%) of 
the Initial Margin Requirement for Client-Related Positions Cleared in 
a Clearing Participant's Customer Account Origin May Be Satisfied by a 
Clearing Participant Utilizing US Treasuries

April 18, 2012.

I. Introduction

    On February 17, 2012, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2012-01 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'').\1\ The proposed rule change was 
published for comment in the Federal Register on March 7, 2012.\2\ The 
Commission received no comment letters. For the reasons discussed 
below, the Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 34-66500 (March 1, 
2012), 77 FR 13678 (March 7, 2012).
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II. Description

    This rule change will allow clearing participants to satisfy the 
initial margin-related liquidity requirements for client-related 
positions cleared in a clearing participant's customer account origin 
by posting US Treasuries.
    The proposed rule changes provide that one hundred percent (100%) 
of the initial margin requirement for client-related positions cleared 
in a clearing participant's customer account origin may be satisfied by 
the clearing participant utilizing US Treasuries.\3\
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    \3\ ICC applies haircuts to US Treasuries to mitigate liquidity 
risk. The haircuts as of April 1, 2012 are: 1.25% for US Treasuries 
maturing in less than one year, 2.5% for US Treasuries maturing in 
one to five years, 5.0% for US Treasuries maturing in five to ten 
years, and 10.0% for US Treasuries maturing in more than ten years 
(available at: https://www.theice.com/publicdocs/clear_credit/ICE_Clear_Credit_Collateral_Management.pdf).
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    The ICC rules currently provide that for all accounts at least 
forty-five percent (45%) of initial margin must be posted in US dollar 
cash. The next twenty percent (20%) must be posted in US dollar cash or 
US Treasuries. The remaining thirty-five percent (35%) must be posted 
in US dollar cash or US Treasuries or G7 cash.
    The proposed rules provide that at least sixty-five percent (65%) 
of the initial margin requirement for client-related positions cleared 
in a clearing participant's customer account origin must be posted in 
US dollar denominated assets (US dollar cash and/or US Treasuries) and 
the remaining thirty-five percent (35%) must be posted in US dollar 
cash, US Treasuries, or G7 cash. The proposed changes will apply only 
to the initial margin liquidity requirements associated with the 
initial margin requirement for client-related positions cleared in a 
clearing participant's customer account origin. The proposed changes 
will not apply to the ICC liquidity requirements for house initial 
margin and the guaranty fund.
    The proposed rule changes are intended to facilitate client-related 
clearing. Customers of ICC's clearing participants have indicated that 
the current US dollar cash liquidity requirement is too restrictive and 
serves as a barrier to clearing. The proposed rule changes are 
consistent with the recently promulgated CFTC regulation 39.11(e)(1) 
that provides that the CFTC's ``cash'' liquidity requirement includes 
US Treasury obligations. ICC routinely monitors its potential liquidity 
needs and reevaluates its liquidity requirements to ensure that it has 
sufficient intraday liquidity to manage cash payments in the event of a 
member default.\4\
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    \4\ Currently at least 45% of house initial margin and the 
guaranty fund requirements must be posted in US dollar cash and the 
ICC contribution to the guaranty fund is in US dollar cash. 
Additionally, ICC requires all members to meet and maintain their 
minimum guaranty fund requirement deposit of $20 million in US 
dollar cash regardless of the amount of each member's total guaranty 
fund requirement. In addition, in the event of immediate liquidity 
needs in the event of a member's default, ICC may borrow (through 
IntercontinentalExchange, Inc.) up to an aggregate principal amount 
of $100 million against IntercontinentalExchange, Inc.'s senior 
unsecured revolving credit facility.

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[[Page 24547]]

III. Discussion

    Section 19(b)(2)(B) of the Act \5\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. Section 17A(b)(3)(F) of the Act \6\ 
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.
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    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed rule change is intended to facilitate client-related 
clearing. Because the proposed rule change will expand the use of US 
Treasuries for the initial margin requirement for client-related 
positions cleared in a clearing participant's customer account origin, 
it will help remove certain barriers to client-related clearing, 
thereby promoting the prompt and accurate clearance and settlement of 
derivative agreements, contracts, and transactions, and therefore is 
consistent with the requirements of Section 17A(b)(3)(F) of the Act.

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder.
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    \7\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-ICC-2012-01) be, and 
hereby is, approved.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9769 Filed 4-23-12; 8:45 am]
BILLING CODE 8011-01-P


