Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 10647 

1See ‘‘PWG Announces Initiatives to Strengthen 

OTC Derivatives Oversight and Infrastructure.’’ U.S. 

Department of the Treasury press release issued 

November 14, 2008. Available at: http:// 

www.treasury.gov/press/releases/hp1272.htm. The 

Secretary of the Treasury serves as chairman of the 

group, which includes the chairmen of the Federal 

Reserve Board, the Securities and Exchange 

Commission, and the Commodity Futures Trading 

Commission, and which worked with the Office of 

the Comptroller of the Currency and the Federal 

Reserve Bank of New York on these initiatives. 

2Securities Exchange Act Release No. 34–59527 

(March 6, 2009). Order Granting Temporary 

Exemptions Under the Securities Exchange Act of 

1934 in Connection with Request on Behalf of ICE 

US Trust LLC Related to Central Clearing of Credit 

Default Swaps, and Request for Comments. See 

http://www.sec.gov. The SEC’s order relates only to 

and is necessary only for CDS that are not swap 

agreements under Section 206A of the GrammLeach-Bliley Act. 

3The ICE Trust request defines affiliate to mean 

an entity that directly, or indirectly through one or 

more intermediaries, controls or is controlled by, or 

under common control with, an ICE Trust 

Participant. 

4 17 CFR Chapter IV parts 400–405, and 449 were 

issued under Section 15C(a), (b), and (d). See Part 

II Section 15C of this Order, infra. 

5See Letter from Johnathan Short, 

IntercontinentalExchange Inc. and Kevin McClear, 

The Clearing Corporation, to the Commissioner of 

the Public Debt, Van Zeck, February 26, 2009, 

available at http://www.treasurydirect.gov/instit/ 

statreg/gsareg/gsareg.htm. 

6The temporary exemptions contained in this 

Order are based on the facts and circumstances 

presented in the request. These temporary 

exemptions could become unavailable if the facts or 

circumstances change such that the representations 

in the request are no longer materially accurate. The 

status of Cleared CDS submitted to ICE Trust prior 

to such change would be unaffected. 

7For purposes of this Order, ICE Trust Participant 

means any participant in ICE Trust that submits 

CDS that reference a government security to ICE 

Trust for clearance and settlement exclusively (i) for 

its own account or (ii) for the account of an affiliate 

that controls, is controlled by, or is under common 

control with the participant in ICE Trust. 

8ECPs are defined in Section 1a(12) of the 

Commodity Exchange Act (‘‘CEA’’), 7 U.S.C. 1 et 

seq. The use of the term ECPs in this Order refers 

to the definition of ECPs as in effect on the date of 

this Order, and excludes persons that are ECPs 

under Section 1a(12)(C). Treasury’s exemption 

provided in this Order to ECPs includes IDBs that 

are ECPs. 

9As used in this Order, registered or noticed 

government securities brokers or government 

securities dealers encompass all brokers, dealers, 

and entities required to register or file notice 

pursuant to Section 15C(a)(1) of the Exchange Act. 

See note 18, infra. 

10For purposes of this Order, Cleared CDS means 

a credit default swap that is submitted (or offered, 

purchased, or sold on terms providing for 

submission) to ICE Trust, that is offered only to, 

purchased only by, and sold only to ECPs (as 

defined in Section 1a(12) of the CEA as in effect on 

the date of this Order (other than a person that is 

an ECP under paragraph (C) of that section)), and 

that references a government security. 

Board decisions and notices are 

available on our Web site at http:// 

www.stb.dot.gov. 

By the Board, Chairman Nottingham, Vice 

Chairman Mulvey, and Commissioner 

Buttrey. 

Decided: March 5, 2009. 

Jeffrey Herzig, 

Clearance Clerk. 

[FR Doc. E9–5141 Filed 3–10–09; 8:45 am] 

BILLING CODE 4915–01–P 

DEPARTMENT OF THE TREASURY 

Order Granting Temporary Exemptions 

From Certain Provisions of the 

Government Securities Act and 

Treasury’s Government Securities Act 

Regulations in Connection With a 

Request on Behalf of ICE US Trust LLC 

Related to Central Clearing of Credit 

Default Swaps, and Request for 

Comments 

AGENCY: Department of the Treasury, 

Office of the Assistant Secretary for 

Financial Markets. 

ACTION: Notice of temporary 

exemptions. 

SUMMARY: The Department of the 

Treasury (Treasury) is granting 

temporary exemptions from certain 

provisions of the Government Securities 

Act of 1986 (GSA) and Treasury’s GSA 

regulations in connection with a request 

on behalf of ICE US Trust LLC related 

to the central clearing of credit default 

swaps that reference government 

securities. These temporary exemptions 

are consistent with temporary 

exemptions the Securities and Exchange 

Commission recently granted to ICE US 

Trust LLC related to the central clearing 

of credit default swaps. Treasury is also 

soliciting public comment on this 

Order. 

DATES: Effective: March 6, 2009. 

FOR FURTHER INFORMATION CONTACT: Lori 

Santamorena, Executive Director; Lee 

Grandy, Associate Director; or Kevin 

Hawkins, Government Securities 

Specialist; Bureau of the Public Debt, 

Department of the Treasury, at 202– 

504–3632. 

SUPPLEMENTARY INFORMATION: The 

following is Treasury’s exemptive order: 

I. Introduction 

Treasury and other financial 

regulators have raised concerns related 

to the over-the-counter (‘‘OTC’’) market 

in credit default swaps (‘‘CDS’’). These 

concerns relate to the potential systemic 

risk to the financial system posed by 

such CDS markets. The President’s 

Working Group on Financial Markets 

(‘‘PWG’’) noted in November 2008 that 

its: 

Top near-term OTC derivatives priority is to 

oversee the successful implementation of 

central counterparty services for credit 

default swaps. A well-regulated and 

prudently managed CDS central counterparty 

can provide immediate benefits to the market 

by reducing the systemic risk associated with 

counterparty credit exposures. It also can 

help facilitate greater market transparency 

and be a catalyst for a more competitive 

trading environment that includes exchange 

trading of CDS.1

In this context, the Securities and 

Exchange Commission (‘‘SEC’’) recently 

issued to ICE US Trust LLC (‘‘ICE 

Trust’’), certain participants in ICE 

Trust, and others, exemptions from 

certain provisions of the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’).2 The SEC’s exemptions did not 

cover the Exchange Act provisions 

applicable to government securities. 

IntercontinentalExchange, Inc. 

(‘‘ICE’’) and The Clearing Corporation 

(‘‘TCC’’) requested that Treasury grant, 

pursuant to its authority under Section 

15C of the Exchange Act, an exemption 

for ICE Trust, participants in ICE Trust 

and their affiliates,3 and interdealer 

brokers (‘‘IDBs’’) from the provisions of 

Section 15C(a), (b), and (d) (other than 

subsection (d)(3)) and the Treasury rules 

thereunder applicable to government 

securities brokers and government 

securities dealers,4 to the extent they 

‘‘would otherwise be applicable to the 

activities of any of the foregoing in 

connection with the offer, execution, 

termination, clearance, settlement, 

performance and related activities 

involving’’ CDS entered into by 

participants in ICE Trust with other 

such participants and submitted to ICE 

Trust for clearance and settlement.5

Based on the facts presented and the 

representations made in the request on 

behalf of ICE Trust (‘‘the request’’),6 and 

for legal certainty and other reasons 

discussed in this Order, the Secretary of 

the Treasury (‘‘Secretary’’) is granting 

two temporary exemptions. First, the 

Secretary is granting a temporary 

exemption to ICE Trust, certain 

participants in ICE Trust (‘‘ICE Trust 

Participants’’),7 and certain eligible 

contract participants (‘‘ECPs’’),8 as 

defined in the Commodity Exchange Act 

(‘‘CEA’’), from the registration 

requirements under Section 15C and 

certain regulations applicable to 

registered or noticed government 

securities brokers or government 

securities dealers.9 The temporary 

exemption applies to these entities’ 

transactions in ‘‘Cleared CDS’’ as 

defined in this Order,10 which generally 

are CDS submitted to ICE Trust where 

the CDS reference a government 

security. In general, this exemption does 

not apply to any ICE Trust Participant 

that is registered or noticed as a 

government securities broker or a 

government securities dealer pursuant 


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10648 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

11A financial institution is defined in 15 U.S.C. 

78c(a)(46). 

12Public Law 99–571, 100 Stat. 3208 (1986). 

13The term government securities, as defined at 

15 U.S.C. 78c(a)(42), means: (A) Securities which 

are direct obligations of, or obligations guaranteed 

as to principal or interest by, the United States; (B) 

securities which are issued or guaranteed by the 

Tennessee Valley Authority or by corporations in 

which the United States has a direct or indirect 

interest and which are designated by the Secretary 

of the Treasury for exemption as necessary or 

appropriate in the public interest or for the 

protection of investors; (C) securities issued or 

guaranteed as to principal or interest by any 

corporation the securities of which are designated, 

by statute specifically naming such corporation, to 

constitute exempt securities within the meaning of 

the laws administered by the SEC; and (D) generally 

‘‘any put, call, straddle, option, or privilege’’ on a 

government security other than one that is traded 

on a national securities exchange or for which 

quotations are disseminated through an automated 

quotation system operated by a registered securities 

association. Certain Canadian government 

obligations are also included for certain purposes. 

14A government securities broker generally is 

‘‘any person regularly engaged in the business of 

effecting transactions in government securities for 

the account of others’’ with certain exclusions. 15 

U.S.C. 78c(a)(43). 

15A government securities dealer generally is 

‘‘any person engaged in the business of buying and 

selling government securities for his own account, 

through a broker or otherwise,’’ with certain 

exclusions. 15 U.S.C. 78c(a)(44). 

16 17 CFR part 400 Rules of general application; 

17 CFR part 401 Exemptions; 17 CFR part 402 

Financial responsibility; 17 CFR part 403 Protection 

of customer securities and balances; 17 CFR part 

404 Recordkeeping and preservation of records; 17 

CFR part 405 Reports and audit; 17 CFR part 420 

Large position reporting; and 17 CFR part 449 

Forms, Section 15C of the Securities Exchange Act 

of 1934. The GSA regulations also include 

requirements for custodial holdings by depository 

institutions at 17 CFR part 450, which were issued 

under Title II of the GSA. 17The definition of appropriate regulatory agency 

with respect to a government securities broker or a 

government securities dealer is set out at 15 U.S.C. 

78c(a)(34)(G). The definition includes the Board of 

Governors of the Federal Reserve System, the 

Comptroller of the Currency, the Federal Deposit 

Insurance Corporation, the Director of Thrift 

Supervision, and in limited circumstances the SEC. 18The GSA regulations apply to all classes of 

government securities brokers and government 

securities dealers required to register or file notice 

pursuant to Section 15C(a)(1) of the Exchange Act. 

This encompasses registered brokers and dealers 

(including OTC derivatives dealers), registered 

government securities brokers and registered 

government securities dealers (those specialized 

government securities brokers and government 

securities dealers that conduct a business in only 

government or other exempted securities (other 

than municipal securities)), and financial 

institutions that are required to file notice as 

government securities brokers and government 

securities dealers. See 17 CFR 400.1 and definitions 

at 17 CFR 400.3. The GSA regulations also address 

futures commission merchants that are government 

securities brokers or government securities dealers, 

but these entities are not covered in this Order. (The 

definitions of ‘‘government securities broker’’ and 

‘‘government securities dealer’’ in 15 U.S.C. 

78c(a)(43) and 78c(a)(44) exclude certain persons 

registered with the Commodity Futures Trading 

Commission (‘‘CFTC’’), but only if such persons 

effect transactions in government securities that the 

SEC, in consultation with the CFTC, has 

determined to be incidental to such persons’ 

futures-related business.) 19See note 2, supra. The SEC’s exemptive order 

applies only to CDS that are not swap agreements 

and thus not excluded from the definition of 

‘‘security’’ by Section 3A of the Exchange Act. 

20 15 U.S.C. 78mm(b). 

21See note 13, supra. 

to Section 15C(a)(1) of the Exchange 

Act. 

Second, with respect to registered or 

noticed government securities brokers 

and government securities dealers that 

are not financial institutions,11 the 

Secretary is granting a temporary 

exemption from certain Treasury 

regulatory requirements consistent with 

the SEC’s treatment of registered brokers 

and dealers in its exemptive order. This 

temporary exemption similarly applies 

to these entities’ transactions in Cleared 

CDS. 

II. Section 15C 

Title I of the Government Securities 

Act of 1986 12 (‘‘GSA’’) amended the 

Exchange Act by adding Section 15C, 

authorizing the Secretary to promulgate 

regulations with respect to transactions 

in government securities 13 effected by 

government securities brokers 14 and 

government securities dealers 15

concerning financial responsibility, 

protection of customer securities and 

balances, and recordkeeping and 

reporting. 

Under Title I of the GSA, all 

government securities brokers and 

government securities dealers are 

required to comply with the 

requirements in Treasury’s GSA 

regulations that are set out at 17 CFR 

parts 400–449.16 Treasury’s GSA 

regulations, for the most part, 

incorporate with some modifications 

SEC rules for non-financial institution 

government securities brokers and 

government securities dealers and the 

appropriate regulatory agency 17 rules 

for financial institutions that are 

required to file notice as government 

securities brokers and government 

securities dealers.18

Section 15C(a)(5) of the Exchange Act 

provides that the Secretary: 

By rule or order, upon the Secretary’s own 

motion or upon application, may 

conditionally or unconditionally exempt any 

government securities broker or government 

securities dealer, or class of government 

securities brokers or government securities 

dealers, from any provision of subsection (a), 

(b), or (d) of this section, other than 

subsection (d)(3), or the rules thereunder, if 

the Secretary finds that such exemption is 

consistent with the public interest, the 

protection of investors, and the purposes of 

[the Exchange Act]. 

As noted above, the SEC recently 

issued an order granting temporary, 

conditional exemptions under the 

Exchange Act to ICE Trust in connection 

with the clearing and settling of certain 

CDS, as well as to certain other persons 

for proposed related activities.19 The 

SEC noted in its order that the 

temporary exemptions extended neither 

to the Exchange Act provisions 

applicable to government securities as 

set forth in Section 15C and its 

underlying rules and regulations, nor to 

the related definitions of ‘‘government 

securities,’’ ‘‘government securities 

broker,’’ and ‘‘government securities 

dealer.’’ The SEC further noted that it 

does not have authority under Section 

36 of the Exchange Act to issue 

exemptions in connection with these 

provisions.20

The request on behalf of ICE Trust 

states that some CDS include reference 

obligations or deliverable obligations 

that may be government securities as 

defined in Section 3(a)(42) of the 

Exchange Act.21 In providing temporary 

exemptions from certain provisions of 

Section 15C of the Exchange Act, 

Treasury is not making a determination, 

for purposes of this Order, whether 

particular CDS are ‘‘government 

securities.’’ 

III. CDS 

A CDS is a bilateral contract between 

two parties, known as counterparties. 

The value of this contract is based on 

underlying obligations of a single entity 

or on a particular security or other debt 

obligation, or an index of several such 

entities, securities, or obligations. The 

obligation of a seller under a CDS 

contract to make payments is triggered 

by a default or other credit event 

involving such entity or entities or such 

security or securities. Investors may 

purchase CDS for a variety of reasons, 

including to offset or insure against risk 

in their portfolios, to take synthetic 

positions in bonds or in segments of the 

debt market, or to capitalize on credit 

spreads. In recent years, CDS market 

volumes have rapidly increased and this 

growth has coincided with a significant 

rise in the types and number of entities 

participating in the CDS market. 

Under a typical CDS contract, the 

seller of the contract agrees, in exchange 

for receiving fixed periodic payments 

from the purchaser, to assume the credit 

risk of the underlying obligation(s) and 

to compensate the purchaser in the 

event of a default, bankruptcy, or other 

credit event. A bilateral CDS contract 

therefore entails counterparty risk 

between the purchaser and the seller. 

Currently, CDS participants bilaterally 

manage counterparty risk by monitoring 

their counterparties, entering into legal 

agreements that permit them to net 


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22Novation generally is a process through which 

the original obligation between a buyer and seller 

is discharged through the substitution of the CCP 

as seller to buyer and buyer to seller, creating two 

new contracts. 

23See note 5, supra. 

24The Federal Reserve Board announced on 

March 4, 2009, its approval of the application by 

ICE US Trust LLC to become a member of the 

Federal Reserve System. See Federal Reserve Board 

press release, available at http:// 

www.federalreserve.gov/newsevents/press/orders/ 

20090304a.htm. 

25The request states that the participant criteria 

are specified in the ICE Trust Rules. 

gains and losses across contracts, and 

requiring counterparty exposures to be 

collateralized. A central counterparty 

(‘‘CCP’’) could allow participants to 

avoid risks specific to an individual 

counterparty because a CCP ‘‘novates’’ 

bilateral trades by entering into separate 

contractual arrangements with each 

counterparty—becoming buyer to each 

seller and seller to each buyer.22

Novation is one of the means by which 

a CCP can assume counterparty risk. 

For this reason, a CCP for CDS could 

contribute generally to the goal of 

mitigating potential systemic risk. As 

part of its risk management program, a 

CCP could subject novated contracts to 

initial and variation margin 

requirements and establish clearing and 

guarantee funds. The CCP also could 

implement a loss-sharing arrangement 

among its participants to respond to a 

potential participant insolvency or 

default. 

Recent credit market events have 

demonstrated the need for mechanisms 

to help manage potential counterparty 

risks posed by CDS. A prudentlymanaged CCP could help promote 

efficiency and reduce the potential 

systemic risk associated with 

counterparty credit exposures. These 

benefits could be particularly significant 

in times of market stress, as CCPs could 

enhance transparency and mitigate the 

potential for a market participant’s 

difficulties to destabilize other market 

participants. 

IV. ICE Trust 

As noted above, ICE and TCC, on 

behalf of ICE Trust, have requested that 

the Secretary grant exemptions from 

certain requirements under the 

Exchange Act with respect to the 

proposed activities of ICE Trust in 

clearing and settling certain CDS, as 

well as the proposed activities of certain 

other persons.23

Based on the request, we understand 

the facts to be as follows. ICE and TCC 

are each corporations organized under 

the laws of the State of Delaware. The 

request states that ICE is in the process 

of acquiring TCC. ICE Trust is organized 

as a New York State chartered limited 

liability trust company, and will become 

a member of the Federal Reserve 

System.24 ICE Trust is subject to direct 

supervision and examination by the 

New York State Banking Department, 

and due to its expected membership in 

the Federal Reserve System, will be 

subject to direct supervision and 

examination by the Board of Governors 

of the Federal Reserve System, 

specifically by the Federal Reserve Bank 

of New York. 

We further understand that CDS 

transactions entered into by ICE Trust 

Participants with other ICE Trust 

Participants will be submitted to ICE 

Trust for clearance and settlement. The 

request represents that initially, ICE 

Trust’s business will be limited to the 

provision of clearing services for a 

limited range of CDS in the OTC market. 

During this initial phase, ICE Trust’s 

CDS clearing services will be limited to 

transactions for the proprietary accounts 

of ICE Trust Participants (in each case, 

acting as principal for its own account 

or the account of an affiliate). ICE Trust 

will act as a CCP for ICE Trust 

Participants by assuming, through 

novation, the obligations of all eligible 

CDS transactions accepted by it for 

clearing and by collecting margin and 

other credit support from ICE Trust 

Participants to collateralize their 

obligations to ICE Trust. 

The request states that ICE Trust 

anticipates that it will eventually 

expand the range of CDS contracts 

eligible for clearing to include single 

name CDS (which could include issuers 

of government securities). The request 

explains that participation in ICE Trust 

will be open to all qualified applicants, 

each of whom will clear transactions 

solely as principal for its own account 

and not on behalf of other persons. In 

order to qualify as an ICE Trust 

Participant, an applicant will be 

required to satisfy ICE Trust’s 

participant criteria at the time that the 

applicant applies to ICE Trust and on an 

ongoing basis thereafter.25 Among these 

criteria is a requirement that each ICE 

Trust Participant is subject to regulation 

for capital adequacy by a federal or 

foreign financial regulator or is an 

affiliate of an entity that is subject to 

regulation by such a financial regulator 

(and as a result the ICE Trust Participant 

would be subject to consolidated 

holding company group supervision). 

Although CDS are currently 

bilaterally negotiated and executed, 

major market participants frequently use 

the Deriv/SERV service of The 

Depository Trust & Clearing Corporation 

comparison and confirmation service 

when documenting their CDS 

transactions. ICE Trust will leverage the 

Deriv/SERV infrastructure in operating 

its CDS clearing service. 

ICE Trust will collect and process 

information about CDS transactions and 

positions from all of its participants. 

With this information, ICE Trust plans 

to, among other things, calculate and 

disseminate current values for open 

positions for the purpose of setting 

appropriate margin levels, or have an 

agent perform these functions on its 

behalf. ICE Trust believes that the 

availability of such information could 

improve the fairness, efficiency, and 

competitiveness of the market. 

Moreover, with pricing and valuation 

information relating to CDS 

transactions, ICE Trust represents that 

market participants would be able to 

derive information about underlying 

securities and indexes. ICE Trust 

believes this could improve the 

efficiency and effectiveness of the 

securities markets by allowing investors 

to better understand credit conditions 

generally. 

ICE Trust maintains that in addition 

to reducing the outstanding notional 

amount of ICE Trust-cleared CDS, it will 

further mitigate counterparty risk to ICE 

Trust, ICE Trust Participants, and the 

CDS market generally through its 

margin, guaranty fund, and credit 

support framework. 

As the counterparty to each of the ICE 

Trust Participants, ICE Trust will have 

exposure to default risk by ICE Trust 

Participants. To address this 

counterparty credit risk, ICE Trust states 

that it will require the ICE Trust 

Participants to provide credit support 

for their obligations under cleared CDS 

transactions and has established rules 

that ‘‘mutualize’’ the risk of an ICE Trust 

Participant default across all ICE Trust 

Participants. ICE Trust’s risk 

management infrastructure and related 

risk metrics have been structured 

specifically for the CDS products that 

ICE Trust clears. Each ICE Trust 

Participant’s credit support obligations 

will be governed by a uniform credit 

support framework and applicable ICE 

Trust Rules. 

The request also states that ICE Trust 

Participants may use the facilities of an 

IDB to execute CDS, for example, to 

access liquidity more rapidly or to 

maintain pre-execution anonymity, and 

submit such transactions for clearance 

and settlement to ICE Trust. Further, 

these IDBs may be unregistered with the 

SEC, may be registered as broker-dealers 

or government securities brokers or 

government securities dealers, or may 

be registered as broker-dealers and 


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26The approach of the SEC exemptive order was 

to apply substantially the same framework to CDS 

transactions that applies to transactions in securitybased swap agreements. See note 2, supra. While 

Section 3A of the Exchange Act excludes ‘‘swap 

agreements’’ from the definition of ‘‘security,’’ 

certain antifraud and insider trading provisions 

under the Exchange Act explicitly apply to securitybased swap agreements. Security-based swap 

agreement is defined in Section 206B of the 

Gramm-Leach-Bliley Act as a swap agreement in 

which a material term is based on the price, yield, 

value, or volatility of any security or any group or 

index of securities, or any interest therein. 

27Treasury is providing relief to ECPs, including 

IDBs that are ECPs, consistent with the SEC’s order 

and the treatment of security-based swap 

agreements under the Exchange Act. A swap 

agreement is defined under Section 206A of the 

Gramm-Leach-Bliley Act, in part, as any agreement, 

contract, or transaction between eligible contract 

participants (as defined in Section 1a(12) of the 

Commodity Exchange Act * * * other than a 

person that is an eligible contract participant under 

Section 1a(12)(C) of the Commodity Exchange Act 

* * *) * * * the material terms of which (other 

than price and quantity) are subject to individual 

negotiation. 15 U.S.C. 78c note. 

28For the purposes of this Order, the terms 

purchasing and selling mean the execution, 

termination (prior to its scheduled maturity date), 

assignment, exchange, or similar transfer or 

conveyance of, or extinguishing the rights or 

obligations under, a cleared CDS transaction, as the 

context may require. This is consistent with the 

meaning of the terms ‘‘purchase’’ or ‘‘sale’’ under 

the Exchange Act in the context of security-based 

swap agreements. See Exchange Act Section 

3A(b)(4). 

29See note 10, supra. 

operating subject to Regulation ATS. 

The request indicates that these IDBs, 

although they are compensated for 

matching and effecting CDS 

transactions, do not handle the funds or 

property of their CDS participants, and 

similarly do not assume market 

positions in connection with their 

intermediation of CDS transactions. 

The request states that a CDS that 

does not qualify as a security-based 

swap agreement may potentially be 

subject to characterization as a security, 

and similarly, that a CDS that has one 

or more reference or deliverable 

obligations that are government 

securities and that does not qualify as a 

security-based swap agreement may 

potentially be subject to characterization 

as a government security. 

The request also asserts that the 

framework for the regulation of 

securities broker-dealers has been 

effective for traditional securities 

activities, but it has not provided a 

commercially practical framework for 

the conduct of broad categories of OTC 

derivatives activities. The request states 

that little would be gained by subjecting 

ICE Trust Participants to regulation as 

government securities brokers or 

government securities dealers with 

respect to any cleared CDS that 

reference government securities, given 

that ICE Trust Participants will be 

sophisticated derivatives market 

participants, will be acting solely for 

their own accounts (or the account of 

their affiliates) and will be limited to 

firms who are subject to regulation or 

consolidated supervision by a financial 

regulator. 

ICE Trust further states that requiring 

government securities broker and 

government securities dealer regulation 

and imposing the Exchange Act Section 

15C government securities regime on 

any cleared CDS that reference 

government securities would create a 

significant and burdensome dislocation 

of this part of the CDS market and 

would present a significant obstacle to 

the adoption of clearing for this and 

related segments of the CDS market. The 

request states that the imposition of 

such additional regulation and 

regulatory constraints would be 

unwarranted, would not constitute an 

efficient allocation of regulatory 

resources, and would not serve the 

public interest. ICE Trust believes that, 

equally important, ‘‘given the size and 

significance of the CDS market, 

proceeding in the face of any material 

legal uncertainty as to the regulatory 

status of a significant portion of CDS 

cleared through ICE Trust would be 

unacceptable both to market 

participants and the official sector.’’ The 

request states that either outcome would 

produce undesirable consequences and 

jeopardize the important benefits that 

the introduction of central clearing for 

CDS can provide. 

The request asks for exemptive relief 

for the avoidance of legal uncertainty, 

on terms and conditions that would, in 

effect, permit ICE Trust, ICE Trust 

Participants and their affiliates, and 

IDBs to continue to conduct business in 

cleared CDS that reference government 

securities on the basis that such 

transactions would be treated as 

security-based swap agreements under 

the Exchange Act.26

V. Temporary Exemption for ICE Trust, 

ICE Trust Participants and Certain 

ECPs 

Treasury believes that the application 

of the GSA requirements to certain 

participants in CDS transactions that are 

not currently registered or noticed 

government securities brokers or 

government securities dealers could 

deter some market participants from 

using ICE Trust to clear CDS 

transactions where the CDS references a 

government security and thus reduce 

the CCP benefit of mitigating potential 

systemic risk. Moreover, based on the 

representations made in the request for 

exemptive relief, Treasury has 

concluded that the CCP facility for CDS 

proposed by ICE Trust could increase 

transparency, enhance counterparty risk 

management, and contribute generally 

to the goal of mitigating systemic risk. 

Accordingly, pursuant to Section 

15C(a)(5) of the Exchange Act, the 

Secretary finds that it is consistent with 

the public interest, the protection of 

investors, and the purposes of the 

Exchange Act to grant a temporary 

exemption until December 6, 2009 from 

the provisions of Section 15C(a), (b), 

and (d) (other than subsection (d)(3)) of 

the Exchange Act, and the rules 

thereunder. This temporary exemption 

applies to: (1) ICE Trust, (2) ICE Trust 

Participants that are not government 

securities brokers or government 

securities dealers registered or noticed 

under Section 15C(a)(1) of the Exchange 

Act, and (3) any ECPs 27 other than: (a) 

ECPs that are registered or noticed 

government securities brokers or 

government securities dealers; (b) ECPs 

that receive or hold funds or securities 

for the purpose of purchasing, selling,28

clearing, settling, or holding CDS 

positions for other persons; and (c) ECPs 

that are ECPs under Section 1a(12)(C) of 

the CEA. This temporary exemption 

applies to these entities’ transactions in 

Cleared CDS.29

VI. Temporary Exemption for 

Registered or Noticed Government 

Securities Brokers and Government 

Securities Dealers That Are Not 

Financial Institutions 

The GSA and its underlying rules and 

regulations require government 

securities brokers and government 

securities dealers to comply with a 

number of obligations that are important 

to protecting investors and promoting 

market integrity. Treasury believes it is 

important to promote the integrity, 

liquidity, and efficiency of financial 

markets while at the same time ensuring 

that risk is mitigated and customers are 

protected. Treasury also wants to avoid 

creating obstacles to the use of CCPs for 

CDS, and recognizes that the factors 

discussed above suggest that the full 

range of GSA requirements generally 

should not be applied immediately to 

government securities brokers and 

government securities dealers that 

engage in transactions involving CDS 

that reference a government security. 

The request suggested that to the 

extent that the SEC’s CDS exemptions 

exclude particular Exchange Act 

provisions or specify certain conditions 

to the exemptive relief, the Treasury 

relief should be issued subject to the 

same conditions and to compliance with 

the same excluded provisions, to the 


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Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 10651 

30See note 2, supra. 

31 15 U.S.C. 78o–5(b)(4) and (5). 

32The rules in part 400 are excluded because they 

are rules of general application. The rules in part 

401 are excluded because they cover existing 

exemptions. The rules in part 449 are excluded 

because they describe forms that are required by 

other rules. 

33Part 402 does not apply to registered brokerdealers that are subject to Rule 15c3–1. 

34See note 10, supra. 

extent applicable. The SEC order 

exempts registered broker-dealers from 

certain provisions and rules under the 

Exchange Act, but retains certain other 

requirements such as those related to 

the protection of customer funds and 

securities.30

Government securities brokers and 

government securities dealers are 

subject to the requirements in Section 

15C and the regulations issued 

thereunder. Treasury was given 

authority by Congress in 1986 to issue 

rules with respect to transactions in 

government securities effected by 

government securities brokers and 

government securities dealers in the 

areas of financial responsibility, 

acceptance of custody and use of 

customer’s securities, the carrying and 

use of customers’ deposits or credit 

balances, and the transfer and control of 

government securities subject to 

repurchase agreements, records, and 

reporting. The GSA regulations issued 

by Treasury reflect a deliberate and 

responsive approach to regulating the 

government securities market, and strike 

a balance between ensuring customer 

protection and the continued liquidity 

and efficiency of the market. In 

addition, Congress directed the 

Secretary to: (1) Use existing regulations 

whenever possible, thereby avoiding 

duplicative requirements; (2) avoid 

imposing overly burdensome rules; and 

(3) ensure that the rules did not result 

in unequal treatment of market 

participants.31

Many of the Treasury regulations 

promulgated under the GSA 

incorporated with limited modifications 

the existing SEC regulations (i.e., 

customer protection, recordkeeping, 

reports, and audits) that applied to 

registered brokers and dealers before the 

passage of the GSA. Treasury generally 

has exercised its authority under the 

Exchange Act in a manner that would 

provide consistency, to the extent 

possible, between the requirements 

applicable to registered broker-dealers 

and government securities brokers and 

government securities dealers. 

Therefore, Treasury is providing certain 

temporary exemptions for government 

securities brokers and government 

securities dealers that are not financial 

institutions from certain GSA 

regulations to maintain consistency 

with the requirements applicable to 

registered broker-dealers with respect to 

CDS transactions that are submitted to 

ICE Trust for clearance and settlement. 

Accordingly, pursuant to Section 

15C(a)(5) of the Exchange Act, the 

Secretary finds that it is consistent with 

the public interest, the protection of 

investors, and the purposes of the 

Exchange Act to grant a temporary 

exemption to registered or noticed 

government securities brokers and 

government securities dealers that are 

not financial institutions until 

December 6, 2009 from the regulations 

in 17 CFR parts 402, 403, 404, and 

405.32 However, this Order does not 

exempt registered or noticed 

government securities brokers or 

government securities dealers from the 

following: (1) The capital requirements 

for registered government securities 

brokers and government securities 

dealers in part 402 of the GSA 

regulations (which are comparable to 

SEC Rule 15c3–1 on net capital) 33; (2) 

the provisions of part 403 of the GSA 

regulations that incorporate and modify 

SEC Rule 15c3–3 on reserves and 

custody of securities; (3) the provisions 

of parts 404 and 405 of the GSA 

regulations that incorporate and modify 

SEC Rules 17a–3 through 17a–5, 17h–1T 

and 17h–2T, on records and reports; and 

(4) the provisions of part 404 of the GSA 

regulations that incorporate and modify 

SEC Rule 17a–13 on quarterly security 

counts. This temporary exemption 

applies to these entities’ transactions in 

Cleared CDS.34

With respect to noticed government 

securities brokers and government 

securities dealers that are financial 

institutions, the GSA regulations 

generally adopt the appropriate 

regulatory agency rules for financial 

institutions that are comparable to the 

SEC rules to which the exemption does 

not extend. The GSA regulations also 

incorporate rules of the appropriate 

regulatory agencies that are otherwise 

applicable to financial institutions. 

Treasury is not extending the temporary 

exemption to financial institution 

government securities brokers and 

government securities dealers. Financial 

institution government securities 

brokers and government securities 

dealers should continue to comply with 

existing rules. 

In issuing this Order, Treasury has 

consulted with and considered the 

views of the staffs of the SEC, the 

Commodity Futures Trading 

Commission, and the financial 

institution appropriate regulatory 

agencies. 

VII. Solicitation of Comments 

Treasury intends to monitor the 

development of CCPs for the CDS 

market and determine to what extent, if 

any, additional action might be 

necessary. For example, as 

circumstances warrant, certain 

conditions could be added, altered, or 

eliminated from this Order. Treasury 

will in the future consider whether the 

temporary exemptions should be 

extended or allowed to expire. Treasury 

believes it is prudent to solicit public 

comment on this Order. Specifically, 

Treasury is soliciting public comment 

on all aspects of these temporary 

exemptions, including: 

1. The appropriateness of the length 

of this temporary exemption (until 

December 6, 2009). If not appropriate, 

what should the appropriate duration 

be? 

2. The appropriateness of the extent of 

the relief granted or any exclusions from 

the exemptions. 

You may send comments to: 

Government Securities Regulations 

Staff, Bureau of the Public Debt, 799 9th 

Street, NW., Washington, DC 20239– 

0001. You may also send comments by 

e-mail to govsecreg@bpd.treas.gov. 

Please provide your full name and 

mailing address. You may download 

this temporary exemptive Order, and 

review the comments we receive, from 

the Bureau of the Public Debt’s Web site 

at http://www.treasurydirect.gov. The 

Order and comments also will be 

available for public inspection and 

copying at the Treasury Department 

Library, Room 1428, Main Treasury 

Building, 1500 Pennsylvania Avenue, 

NW., Washington, DC 20220. To visit 

the library, call (202) 622–0990 for an 

appointment. 

Treasury will continue to consult 

with, the staffs of the SEC, the 

Commodity Futures Trading 

Commission, and the financial 

institution appropriate regulatory 

agencies on this matter. 

VIII. Conclusion 

It is hereby ordered, pursuant to 

Section 15C(a)(5) of the Exchange Act, 

that, until December 6, 2009: 

(a) Temporary Exemption for ICE Trust, 

ICE Trust Participants, and Certain 

ECPs 

The following persons are exempt 

from the provisions of Section 15C(a), 

(b), and (d) (other than subsection (d)(3)) 

of the Exchange Act, and the rules 

thereunder: ICE Trust, ICE Trust 

Participants that are not government 


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10652 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

35See note 8, supra. 

36See note 10, supra. 

securities brokers or government 

securities dealers registered or noticed 

under Section 15C(a)(1) of the Exchange 

Act, and any ECPs 35 other than: (a) 

ECPs that are registered or noticed 

government securities brokers or 

government securities dealers; (b) ECPs 

that receive or hold funds or securities 

for the purpose of purchasing, selling, 

clearing, settling, or holding CDS 

positions for other persons; and (c) ECPs 

that are ECPs under Section 1a(12)(C) of 

the CEA. This temporary exemption 

applies to these entities’ transactions in 

Cleared CDS.36

(b) Temporary Exemption for Registered 

or Noticed Government Securities 

Brokers and Government Securities 

Dealers that are not Financial 

Institutions 

Registered or noticed government 

securities brokers and government 

securities dealers that are not financial 

institutions are exempt from the 

regulations in 17 CFR parts 402, 403, 

404, and 405. However, this Order does 

not exempt registered or noticed 

government securities brokers or 

government securities dealers that are 

not financial institutions from the 

following: 

(1) The capital requirements for 

registered government securities brokers 

and government securities dealers in 

part 402 of the GSA regulations (which 

are comparable to SEC Rule 15c3–1 on 

net capital); 

(2) the provisions of part 403 of the 

GSA regulations that incorporate and 

modify SEC Rule 15c3–3 on reserves 

and custody of securities; 

(3) the provisions of parts 404 and 405 

of the GSA regulations that incorporate 

and modify SEC Rules 17a–3 through 

17a–5, 17h–1T and 17h–2T, on records 

and reports; and 

(4) the provisions of part 404 of the 

GSA regulations that incorporate and 

modify SEC Rule 17a–13 on quarterly 

security counts. 

This temporary exemption applies to 

these entities’ transactions in Cleared 

CDS. 

The temporary exemptions contained 

in this Order are based on the facts and 

circumstances presented in the request. 

These temporary exemptions could 

become unavailable if the facts or 

circumstances change such that the 

representations in the request are no 

longer materially accurate. The status of 

Cleared CDS submitted to ICE Trust 

prior to such change would be 

unaffected. 

Karthik Ramanathan, 

Acting Assistant Secretary for Financial 

Markets. 

[FR Doc. E9–5242 Filed 3–6–09; 4:15 pm] 

BILLING CODE 4810–39–P 

DEPARTMENT OF THE TREASURY 

Financial Crimes Enforcement Network 

Agency Information Collection 

Activities; Proposed Collection; 

Comment Request; Report of 

International Transportation of 

Currency or Monetary Instruments 

AGENCY: Financial Crimes Enforcement 

Network, Treasury. 

ACTION: Notice and request for 

comments regarding the renewal 

without change of the Report of 

International Transportation of 

Currency or Monetary Instruments. 

SUMMARY: As part of our continuing 

effort to reduce paperwork and 

respondent burden, the Financial 

Crimes Enforcement Network invites the 

general public and other Federal 

agencies to comment on an information 

collection requirement concerning the 

Report of International Transportation 

of Currency or Monetary Instruments 

(the ‘‘CMIR’’). This request for comment 

is being made pursuant to the 

Paperwork Reduction Act of 1995 

(PRA), Public Law 104–13 (44 U.S.C. 

3506(c)(2)(A)). 

DATES: Written comments should be 

received on or before May 11, 2009 to 

be assured of consideration. 

ADDRESSES: Direct all written comments 

to: Regulatory Policy and Programs 

Division, Financial Crimes Enforcement 

Network, Department of the Treasury, 

P.O. Box 39, Vienna, VA 22183–0039, 

Attention: PRA Comments—Report of 

International Transportation of 

Currency or Monetary Instruments. 

Comments also may be submitted by 

electronic mail to the following Internet 

address: ‘‘regcomments@fincen.gov’’ 

with the caption in the body of the text, 

‘‘Attention: PRA Comments—Report of 

International Transportation of 

Currency or Monetary Instruments.’’ 

FOR FURTHER INFORMATION CONTACT: The 

FinCEN Regulatory Helpline at 800– 

949–2732, select option 6. A copy of the 

form may also be obtained from the 

FinCEN Web site at http:// 

www.fincen.gov/forms/files/ 

fin105_cmir.pdf. 

SUPPLEMENTARY INFORMATION: Title: 

Report of International Transportation 

of Currency or Monetary Instruments. 

OMB Number: 1506–0014. 

Form Number: FinCEN Form 105. 

Abstract: The Bank Secrecy Act 

(BSA), Titles I and II of Public Law 91– 

508, as amended, codified at 12 U.S.C. 

1829b, 12 U.S.C. 1951–1959, and 31 

U.S.C. 5311–5332, authorizes the 

Secretary of the Treasury inter alia to 

issue regulations requiring records and 

reports that are determined to have a 

high degree of usefulness in criminal, 

tax, or regulatory investigations or 

proceedings, or in the conduct of 

intelligence or counter-intelligence 

activities, including analysis, to protect 

against international terrorism or to 

implement counter-money laundering 

programs and compliance procedures. 

Regulations implementing Title II of the 

BSA appear at 31 CFR part 103. The 

authority of the Secretary to administer 

the BSA has been delegated to the 

Director of Financial Crimes 

Enforcement Network. 

Pursuant to the BSA, ‘‘a person or an 

agent or bailee of the person shall file 

a report * * * when the person, agent, 

or bailee knowingly—(1) Transports, is 

about to transport, or has transported, 

monetary instruments of more than 

$10,000 at one time—(A) From a place 

in the United States to or through a 

place outside the United States; or (B) 

to a place in the United States from or 

through a place outside the United 

States; or (2) receives monetary 

instruments of more than $10,000 at one 

time transported into the United States 

from or through a place outside the 

United States.’’ 31 U.S.C. 5316(a). The 

requirement of 31 U.S.C. 5316(a) has 

been implemented through regulations 

promulgated at 31 CFR 103.23 and 

through the instructions to the CMIR. 

Information collected on the CMIR is 

made available, in accordance with 

strict safeguards, to appropriate criminal 

law enforcement and regulatory 

personnel in the official performance of 

their duties. The information collected 

is of use in investigations involving 

international and domestic money 

laundering, tax evasion, fraud, and other 

financial crimes. 

Current Actions: Renewal without 

change. 

Type of Review: Renewal of a 

currently approved collection. 

Affected Public: Individuals, business 

or other for-profit institutions, and notfor-profit institutions. 

Estimated Number of Respondents: 

280,000. 

Estimated Time per Respondent: 11 

minutes. 


rwilkins on PROD1PC63 with NOTICES