
[Federal Register Volume 82, Number 159 (Friday, August 18, 2017)]
[Notices]
[Pages 39484-39485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17431]



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SECURITIES AND EXCHANGE COMMISSION



[Release No. 34-81386; File No. SR-ICC-2017-010]




Self-Regulatory Organizations; ICE Clear Credit LLC; Order 

Approving Proposed Rule Change To Revise the ICC Clearing Rules and the 

ICC Treasury Operations Policies and Procedures



August 14, 2017.



I. Introduction



    On June 16, 2017, ICE Clear Credit LLC (``ICC'') filed with the 

Securities and Exchange Commission (``Commission''), pursuant to 

Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 

and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2017-010) 

to make changes to the ICC Clearing Rules (the ``ICC Rules'') and ICC 

Treasury Operations Policies and Procedures (``Treasury Policy'') to 

remove eligibility of Japanese yen (``JPY''), Great British pounds 

(``GBP''), and Canadian dollars (``CAD'') to meet Initial Margin 

(``IM'') and Guaranty Fund (``GF'') requirements. The proposed rule 

change was published for comment in the Federal Register on July 5, 

2017.\3\ The Commission received no comment letters regarding the 

proposed change. For the reasons discussed below, the Commission is 

approving the proposed rule change.

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    \1\ 15 U.S.C. 78s(b)(1).

    \2\ 17 CFR 240.19b-4.

    \3\ Securities Exchange Act Release No. 34-81037 (June 28, 

2017), 82 FR 31121 (July 5, 2017) (SR-ICC-2017-010) (``Notice'').

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II. Description of the Proposed Rule Change



    ICC has proposed changes to Schedule 401 of the ICC Rules and to 

its Treasury Policy. The proposed changes would remove JPY, GBP, and 

CAD from eligibility to meet IM and GF requirements. Currently, a 

Clearing Participant may meet the final 35% of their IM and GF 

requirements with JPY, GBP, or CAD, in aggregate. Under the proposed 

revisions, Clearing Participants would continue to be able to meet 

their IM and GF requirements using Euro cash, U.S. cash, and/or U.S. 

Treasuries, in accordance with the applicable collateral thresholds.

    Specifically, with respect to Schedule 401 of the ICC Rules, ICC 

proposed removing references to G7 cash (which includes U.S. cash, Euro 

cash, JPY, GBP, and CAD) and defining ``All Eligible Collateral'' for 

both Non-Client IM and GF Liquidity Requirements and Client-Related IM 

Liquidity Requirements to be US cash, Euro cash, and/or U.S. 

Treasuries. Under the proposed changes, U.S. cash, Euro cash, and/or 

U.S. Treasuries would be eligible for meeting the final 35% of IM and 

GF requirements for all Non-Client IM and GF Liquidity Requirements and 

Client-Related U.S. dollar (``USD'') denominated IM Requirements; and 

U.S. cash, Euro cash, and/or U.S. Treasuries would be eligible for 

meeting a maximum of 100% of IM requirements for Client-Related Euro-

Denominated Product Requirements.

    In addition, ICC proposed to update its Treasury Policy to remove 

references to JPY, GBP, and CAD as eligible collateral. Under the 

proposed changes, ICC would remove references to JPY, GBP, and CAD in 

the ``Collateral Liquidation Assumptions'' tables (for both Euro and 

USD denominated requirements). ICC would also update the ``Eligible 

Client Collateral'' section of the Treasury Policy to note that its 

eligible collateral for client IM includes U.S. cash, Euro cash, and 

U.S. government securities in line with current eligible collateral for 

House exposures (i.e., U.S. Treasuries). ICC also would revise the 

``Client-Related



[[Page 39485]]



IM Liquidity Requirements'' section of the Treasury Policy to reflect 

the proposed liquidity requirement changes, namely USD-denominated 

product requirements of 65% cash and/or U.S. Treasuries, and 35% 

remainder eligible U.S. cash, U.S. Treasuries, and/or Euro cash; and 

Euro-denominated product requirements of 100% U.S. cash, Euro cash, 

and/or U.S. Treasuries. The proposed changes also include removing 

reference to G7 cash and including U.S. Treasury securities, U.S. cash, 

and Euro cash as eligible collateral from the House IM and GF Liquidity 

Requirements (for Non-Client USD and Euro-denominated requirements) 

chart, the list of acceptable forms of collateral for IM, and the list 

of acceptable forms of collateral for the GF).



III. Discussion and Commission Findings



    Section 19(b)(2)(C) of the Act \4\ 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 \5\ 

requires, among other things, that the rules of a registered 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, in 

general, to protect investors and the public interest. Rule 17Ad-

22(d)(3) \6\ requires that a registered clearing agency shall 

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.

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    \4\ 15 U.S.C. 78s(b)(2)(C).

    \5\ 15 U.S.C. 78q-1(b)(3)(F).

    \6\ 17 CFR 240.17Ad-22(d)(3).

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    The Commission finds that the proposed rule change, which removes 

JPY, GBP, and CAD from eligibility to meet IM and GF requirements, is 

consistent with Section 17A of the Act and Rule 17Ad-22 thereunder. 

According to ICC, ICC would need to convert JPY, GBP, and CAD into 

another currency in order to use them to satisfy obligations arising 

from the products that ICC clears, which are denominated only in USD or 

Euros. Therefore, from ICC's perspective, JPY, GBP, and CAD are not as 

liquid as USD or Euros for purposes of ICC's business activities. 

Moreover, ICC has noted that JPY has a significant timing issue related 

to conversion. ICC also expressed the view that, from a practical 

standpoint, these changes should have minimal impact on ICC's financial 

resource composition because such currencies have been utilized rarely 

by Clearing Participants to meet IM and GF requirements. The Commission 

believes that, by removing JPY, GBP, and CAD as eligible forms of 

collateral that may be posted to ICC, ICC reduces the risk that ICC 

would not be able to meet its settlement or other liquidity obligations 

timely because of the need to convert one currency to another. The 

Commission therefore finds that the proposed revisions to the ICC Rules 

and Treasury Policy are designed to promote the prompt and accurate 

settlement of securities transactions, derivatives agreements, 

contracts, and transactions for which ICC is responsible, consistent 

with Section 17A(b)(3)(F) of the Exchange Act. Similarly the proposed 

changes are designed to allow ICC to hold collateral in forms that 

minimize the risk of loss or delay in accessing them by reducing the 

need for ICC to conduct currency conversions. The Commission therefore 

finds that the proposed revisions also are consistent with the 

requirements of Rule 17Ad-22(d)(3).



IV. Conclusion



    It is therefore ordered pursuant to Section 19(b)(2) of the Act 

that the proposed rule change (SR-ICC-2017-010) be, and hereby is, 

approved.\7\

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    \7\ 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.\8\

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    \8\ 17 CFR 200.30-3(a)(12).

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Eduardo A. Aleman,

Assistant Secretary.

[FR Doc. 2017-17431 Filed 8-17-17; 8:45 am]

BILLING CODE 8011-01-P




