
[Federal Register Volume 88, Number 165 (Monday, August 28, 2023)]
[Notices]
[Pages 58628-58630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18429]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98200; File No. SR-ICC-2023-013]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to ICC's Treasury Operations 
Policies and Procedures

August 22, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on August 15, 
2023, 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 primarily prepared by ICC. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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. The purpose of the 
Treasury Policy is to articulate the policies and procedures used to 
support the ICC Treasury Department, which is responsible for daily 
cash and collateral management of margin and guaranty fund assets, 
including Client-Related Initial Margin assets. The proposed changes 
consist of clarifications and updates with respect to collateral asset 
haircuts, and additional details on ICC's foreign exchange conversion 
methods should British pound sterling (``GBP'') cash need to be 
converted to another currency in the context of a Clearing Participant 
default. 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 to revise the `Collateral Valuation' section of the 
Treasury Policy \3\ to clarify the description of ICC's collateral 
valuation process across all collateral types. The ICC collateral 
valuation process is based on accurately and effectively pricing the 
assets posted as collateral and appropriately haircutting the assets 
for their native market risks (i.e., the risk of a decrease in value of 
the asset posted as collateral) as well as related cross-currency risk 
(i.e., the risk of the change in value of one currency as compared to 
the value of another currency) when the collateral is to be used to 
cover an obligation denominated in a different currency. All such 
proposed changes are non-material and clarifying, except for the 
haircut process for GBP cash posted as Client-Related Initial Margin 
\4\ used to cover a Euro denominated product requirement. Currently, 
with respect to GBP cash used to cover a Euro denominated product 
requirement, ICC first converts the GBP cash value to its USD value. 
The USD value is haircut at the GBP currency haircut. Then, the EUR 
denominated product requirement is converted to the USD value. The 
resulting USD requirement is grossed up by the EUR currency haircut. 
The effect of the current approach is to haircut GBP cash margin twice, 
which ICC believes is unnecessary as a matter of risk management and 
inefficient.\5\ Under the proposed changes, the value of GBP cash 
posted to cover a Euro denominated obligation will no longer be 
subjected to two currency haircuts. Rather, GBP cash posted to cover a 
Euro obligation, will first be converted to its Euro value and then 
haircut to capture the potential foreign exchange risk between GBP and 
Euro. ICC believes the proposed revised treatment of GBP cash posted to 
cover a Euro obligation is more efficient while still maintaining ICC's 
conservative collateral valuation practices.
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    \3\ Treasury Policy section V.B.2.
    \4\ GBP cash currently is only accepted as Client-Related 
Initial Margin (a/k/a ``Client Margin''). GBP cash collateral is not 
accepted by ICC with respect to (i) House Margin (i.e., margin 
posted by an ICC Clearing Participant to support their proprietary 
positions cleared at ICC) or (ii) General Guaranty Fund 
contributions.
    \5\ ICC recently completed a system change to modify its 
clearing system business logic so that it is no longer necessary 
from a systems standpoint for GBP cash posted to cover a EUR 
denominated to be subjected to two currency haircuts. Due to the 
completed system change, ICC is now in the position to propose this 
rule change to eliminate the inefficient double haircut.
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    Along with this specific change for GBP cash, relevant language in 
the Collateral Valuation section is being clarified and simplified to 
apply generally without need to refer to specific currencies. Thus, 
consistent with the above, the revised section would state generally 
that cash posted in one currency to cover an obligation denominated in 
another currency is first converted to its value in the currency of the 
obligation, and then haircut to capture the potential foreign exchange 
risk. References to specific currencies (which note for example that 
Euro and GBP cash used to cover a USD denominated product requirement 
are first converted to USD value and then the USD value is haircut) 
would be removed as they are unnecessary. Similarly, the revised 
section would state generally that cash posted to cover an obligation 
in the same currency will not be subject to a haircut, rather than 
include multiple currency specific statements to the same effect. ICC 
also is proposing non-material drafting changes to the description of 
the valuation process for collateral posted in the form of U.S. 
Treasuries. ICC is not proposing in those amendments to change the 
currencies that are currently accepted as margin or collateral.
    Also, ICC proposes the addition of Section III.G., ``Non-Committed 
FX Facility'' to the Treasury Policy. Such proposed section would 
reflect that ICC has access to non-committed foreign exchange 
facilities with a diverse set of commercial counterparties. Such 
facilities may be used to convert one currency to another for same day 
settlement, on a non-committed basis. Such section would provide 
additional details with respect to Client-Related Initial Margin posted 
by Clearing Participants in GBP cash. The amendments would note that 
the circumstances where ICC would need to convert such GBP cash 
collateral to another currency are very narrow (as no ICC contracts are 
settled in GBP, and GBP would not be needed for daily settlement). In 
addition, such section would be amended to further note that as ICC 
accepts GBP cash collateral only

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with respect to Client-Related Initial Margin, and that use of Client-
Related Initial Margin by ICC in the context of a Clearing Participant 
default is very limited, the circumstances where ICC would need to 
covert GBP cash collateral into another currency is further limited. 
However, if the narrow circumstances did arise and ICC needed to 
convert GBP cash collateral to either USD or EUR in the context of a 
Clearing Participant default, ICC would use one of its existing non-
committed foreign exchange arrangements to convert the GBP into the 
applicable currency.
    Certain other typographical and similar non-substantive corrections 
are made throughout the Treasury Policy, including references to 
``haircuts.'' Lastly, ICC proposes amending Appendix X., Revision 
History, to reflect the changes and approvals of the Treasury Policy.
(b) Statutory Basis
    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; 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 protect investors and the public interest. 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, Section 17(A)(b)(3)(F),\7\ 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. As described above, the proposed rule change would make 
certain clarifications and updates to the Treasury Policy, in 
particular to avoid an unnecessary double haircut that currently 
applies to GBP cash posted to cover a Euro denominated obligation, 
which may currently disadvantage those customers of Clearing 
Participants that post such cash. The amendments would simplify and 
clarify the description of cross-currency haircuts generally, without 
need for references to specific currencies. The proposed updates would 
also add additional details on ICC's non-committed foreign exchange 
facilities, which would be used, among other purposes, if necessary to 
convert GBP cash posted as Client-Related Initial Margin to cover Euro 
or USD obligations. Taken together, the amendments promote overall 
clarity in the Treasury Policy regarding foreign exchange conversion 
and the cross-currency haircut process. The proposed updates thus 
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, 
contributes to the safeguarding of securities and funds which are in 
the custody or control of ICC or for which it is responsible, and 
generally promotes the protection of investors and the public interest. 
As such, the proposed rule changes are consistent with the requirements 
of Section 17A(b)(3)(F) of the Act.\8\
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ Id.
    \8\ Id.
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    Rule 17Ad-22(e)(5) \9\ requires each covered clearing agency to 
``establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to, as applicable . . . [l]imit the 
assets it accepts as collateral to those with low credit, liquidity, 
and market risks, and set and enforce appropriately conservative 
haircuts and concentration limits if [it] requires collateral to manage 
its or its participants' credit exposure. . . .'' As described above, 
ICC accounts for the risk associated with fluctuations in the value of 
collateral assets by applying haircuts under the Treasury Policy. The 
amendments would revise the cross-currency haircut applicable to GBP 
cash posted to cover Euro obligations to eliminate an unnecessary 
double haircut. ICC believes the amendments would result in a more 
efficient, yet appropriately conservative, haircut level for such GBP 
cash. The amendments would also make a number of other non-substantive 
revisions to clarify the discussion of cross-currency haircuts 
generally and ensure that the Treasury Policy remains effective and 
clear. As such, the amendments would satisfy the requirements of Rule 
17Ad-22(e)(5).\10\
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    \9\ 17 CFR 240.17Ad-22(e)(5).
    \10\ 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 not necessary or 
appropriate in furtherance of the purposes of the Act. As discussed 
above, the amendments would revise the haircut applicable to GBP cash 
posed to cover Euro obligations to avoid a double haircut. ICC believes 
this change will improve efficiency and benefit market participants 
that may choose to post GBP cash as Client-Related Initial Margin. 
Other changes would generally improve the clarity of the Treasury 
Policy. The proposed changes to ICC's Treasury Policy will apply 
uniformly across all market participants. ICC does not believe the 
amendments would adversely affect the costs of clearing for market 
participants, or otherwise affect the ability of market participants to 
access clearing or the market for clearing services generally. 
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:

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Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ICC-2023-013 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to file number SR-ICC-2023-013. 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 (https://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 
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.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-ICC-2023-013 and should 
be submitted on or before September 18, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18429 Filed 8-25-23; 8:45 am]
BILLING CODE 8011-01-P


