```

[Federal Register Volume 89, Number 241 (Monday, December 16, 2024)]
[Notices]
[Pages 101666-101673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29474]

[[Page 101666]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101871; File No. SR-ICC-2024-005]

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

December 10, 2024

I. Introduction

    On August 22, 2024, 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 to revise the ICC 
Treasury Operations Policies and Procedures (``Treasury Policy'') 
(``Proposed Rule Change''). The Proposed Rule Change was published for 
comment in the Federal Register on September 11, 2024.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 100935 (Sept. 5, 2024), 
89 FR 73734 (Sept. 11, 2024) (File No. SR-ICC-2024-005) 
(``Notice'').
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    On October 25, 2024, pursuant to Section 19(b)(2) of the Exchange 
Act,\4\ the Commission designated a longer period within which to 
approve, disapprove, or institute proceedings to determine whether to 
approve or disapprove the Proposed Rule Change, until December 10, 
2024.\5\ The Commission has not received any comments on the Proposed 
Rule Change. For the reasons discussed below, the Commission is 
approving the Proposed Rule Change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ Securities Exchange Act Release No. 101440 (Oct. 25, 2024), 
89 FR 86867 (Oct. 31, 2024) (File No. SR-ICC-2024-005).
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II. Description of the Proposed Rule Change

    ICC is registered with the Commission as a clearing agency for the 
purpose of clearing CDS contracts.\6\ Its Treasury Policy contains 
policies and procedures used to support the ICC Treasury Department 
(``Treasury Department''). The Treasury Department manages ICC's margin 
and guaranty fund assets posted by Clearing Participants as 
collateral.\7\
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    \6\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in ICC's Clearing Rules or the Treasury 
Policy, as applicable.
    \7\ Notice, 89 FR at 73734.
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    The Proposed Rule Change would make a number of changes to the 
Treasury Policy that fit into seven categories: (i) additions to the 
minimum criteria for ICC's settlement banks; (ii) alterations to the 
investment guidelines contained in the Treasury Policy; (iii) 
clarifications that add detail to the Treasury Policy; (iv) increases 
to the breadth of certain Treasury Policy provisions; (v) various 
corrections to the Treasury Policy; (vi) deletion of unnecessary 
language from the Treasury Policy; and (vii) certain changes to make 
the Treasury Policy more consistent with federal and ICC rules.\8\
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    \8\ ICC also proposes several non-substantive changes to the 
Treasury Policy. For example, the current Treasury Policy notes that 
``Treasury reconciles daily and previous day cash and collateral 
balances.'' This language would be modified to read ``Treasury 
reconciles daily: current and previous day cash and non-cash 
collateral balances.''
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1. Minimum Criteria for Settlement Banks

    ICC maintains relationships with various settlement banks to 
facilitate the holding and movement of Margin and Clearing Fund cash 
and collateral between ICC and its Clearing Participants.\9\ The 
current Treasury Policy includes standards and criteria that settlement 
banks must meet in order to be considered for such a relationship with 
ICC, including capitalization, operational capability, and regulatory 
supervision.\10\ To aid in ICC's management of liquidity risk arising 
from settlement arrangements with these banks, the Proposed Rule Change 
would add a requirement that a settlement bank provide ICC with 
specific liquidity information.\11\ An example of liquidity information 
that ICC requires from settlement banks is the banks' Liquidity 
Coverage Ratio. In the event that a bank does not report LCR, the 
Proposed Rule Change would specify that ICC will consider other 
criteria to assess the liquidity of the bank. These other criteria may 
include a description of the bank's liquidity risk management policy or 
the liquidity coverage ratio of the settlement bank's affiliated 
reporting entity within the bank's group.
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    \9\ Notice, 89 FR at 73736.
    \10\ Id.
    \11\ Id.
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2. Investment Guidelines

    The Treasury Policy governs ICC's investment strategy for its own 
operating capital and for the Margin and Guaranty Fund cash collateral 
that it holds. That strategy is designed to provide yield with reduced 
credit and market risk while preserving liquidity and principal.\12\
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    \12\ ICE Clear Credit LLC Treasury Operations Policies and 
Procedures.
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    With respect to ICC's operating capital, currently, the Treasury 
Policy requires ICC to invest operating capital in either bank deposits 
or in U.S. Treasury/Agency reverse repurchase agreements (``repos''). 
However, in the event that bank deposits or reverse repos are 
unavailable or not feasible, ICC may make direct investments in U.S. 
Treasury securities with a maturity of no greater than 98 days.\13\
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    \13\ Notice, 89 FR at 73737.
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    With respect to reverse repos, the current Treasury Policy requires 
that the value of treasury collateral received by ICC must be between 
100.5 percent and 102 percent of the invested U.S. Dollar amount. The 
Proposed Rule Change would eliminate this range and instead require 
that the value of the treasury collateral received by ICC be 102 
percent of the invested U.S. Dollar amount. ICC believes this change 
would reflect current market practice and provide greater protection to 
ICC.\14\
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    \14\ Id. These changes also would apply where ICC invests 
Guaranty Fund and Margin cash in reverse repos. As explained below, 
in certain circumstances, ICC may invest in reverse repos USD cash 
posted by Clearing Participants to satisfy Guaranty Fund and Margin 
requirements. See infra Section II.3.
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    In addition, to provide ICC with greater flexibility to implement 
its investment strategy while still maintaining the quality of its 
investments,\15\ the Proposed Rule Change would eliminate the current 
limitation on the Treasury Department's ability to invest operating 
capital in U.S. Treasury securities only if bank deposits or reverse 
repos are unavailable or infeasible and instead allow ICC's Treasury 
Department the discretion to invest operating capital in bank deposits, 
reverse repos, or U.S. Treasury securities with a final maturity of no 
greater than 98 days. The Proposed Rule Change also would specify that 
ICC would primarily directly invest in U.S. Treasury securities with 
respect to stable balances, for example, restricted cash held for 
regulatory capital purposes.\16\
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    \15\ Notice, 89 FR at 73737.
    \16\ Id.
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3. Additions of Clarifying Details

    The Proposed Rule Change would add clarifying details to the 
Treasury Policy. In a discussion of the Treasury Department's 
responsibilities, the Proposed Rule Change would add a sentence 
explaining that ICC's capacity to facilitate the prompt and accurate 
clearance and settlement of securities transactions and derivative 
agreements, contracts, and transactions for which ICC is responsible, 
and to safeguard securities and funds in ICC's custody or control for 
which it is responsible, is

[[Page 101667]]

aided by the Treasury Department. ICC also proposes clarifying that 
references to the Guaranty Fund in the Treasury Policy are to the 
General Guaranty Fund as defined in ICC Rule 102.\17\ The Proposed Rule 
Change would modify certain current references to ``cash and 
collateral'' and ``cash or collateral'' to ``cash and non-cash 
collateral'' and ``cash and/or non-cash collateral,'' respectively.\18\ 
It also would modify the current description of the Treasury Department 
as being responsible for managing postings by ICC Clearing Participants 
to a statement that the Treasury Department is responsible for managing 
Guaranty Fund collateral postings by ICC Clearing Participants.\19\ In 
the Treasury Department Organizational Structure and Governance 
subsection of the Treasury Policy, ICC also proposes adding text to 
clarify that the Treasury Director oversees the Treasury Department and 
reports to the ICC Chief Operating Officer.\20\
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    \17\ Notice, 89 FR at 73734.
    \18\ Id. For example, ICC proposes that a description of one of 
the Treasury Department's responsibilities should indicate that it 
works with Clearing Participants to assist with other cash and non-
cash collateral related requests rather than cash and collateral 
related requests. Similar changes are also made in the introduction 
to the Treasury Department section and the Funds Management, Types 
of Funds section of the Treasury Policy.
    \19\ Notice, 89 FR at 73734.
    \20\ Id. at 73735.
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    Where ICC describes the types of funds it manages, ICC proposes 
specifying that the definition for Margin is in Rule 102 of ICC's 
Clearing Rules and that the Treasury Policy would refer to Initial 
Margin and Mark-to-Market Margin collectively as Margin.\21\ Similarly, 
the Proposed Rule Change would highlight the location of definitions 
for House Margin, Client-Related Positions, and Client-Related Margin; 
clarify that the Treasury Policy would use the term Client Positions in 
place of Client-Related Positions; \22\ and give a definition of House 
Margin and Client-Related Margin.\23\
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    \21\ Id. ICC's proposal would incorporate Margin and other 
related defined terms throughout the Treasury Policy.
    \22\ Unlike the term Client Positions, Client-Related Positions 
is a term defined in ICC Rule 102.
    \23\ Id. at 73735. The Proposed Rule Change would indicate that 
Initial Margin collateral is maintained and managed separately for 
Clearing Participant House Positions (``House Margin'') and clearing 
activities associated with indirect participant or client positions 
(i.e., Client-Related Margin referred to in the Treasury Policy as 
``Client Margin''). The definitions for House Position, Client-
Related Positions, and Client Related Margin (Client-Related Initial 
Margin) are in Rule 102 of the ICC Rule Book.
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    ICC also proposes adding clarifying language to a subsection of the 
Treasury Policy discussing ICC's investment of US Dollar cash.\24\ This 
language would identify the Federal Reserve Bank (``FRB'') of Chicago 
as a central bank. The amendments would also clarify that if ICC is 
unable to deposit all or a portion of its Guaranty Fund and Margin that 
was posted as USD cash at its FRB accounts, ICC's Treasury Department 
may invest such cash in US Treasury/Agency reverse repurchase 
agreements rather than Treasury/Agency reverse repurchase agreements. 
Similarly, in a subsection of the Treasury Policy addressing liquidity 
protection, ICC proposes specifying that it would call additional 
Initial Margin, rather that additional margin, if a Clearing 
Participant does not meet certain liquidity requirements.\25\
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    \24\ Notice, 89 FR at 73735.
    \25\ Id.
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    The Proposed Rule Change would also add detail to the Cash 
Settlement section of the Treasury Policy. ICC proposes adding options 
premia and interest on Mark-to-Market Margin to a list of Transaction 
Payments in order to reflect current ICC practice.\26\ In a discussion 
of ICC's direct settlement model, ICC also proposes adding detail to 
clarify its settlement operations.\27\ Specifically, ICC would add text 
indicating that in the direct settlement model, Clearing Participants 
must establish settlement bank arrangements and make all requested 
payments to ICC within the required timeframe. The Treasury Policy 
would be further updated to note that, under the direct settlement 
model, ICC does not maintain accounts at each of the Clearing 
Participant settlement banks. Instead, ICC maintains direct debit 
authority over the Clearing Participant settlement bank accounts as 
such authority is granted by each Clearing Participant.
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    \26\ Id. ICC also proposes replacing Trade Payments with 
transaction payments in this provision.
    \27\ Id. at 73736.
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    ICC's proposal would also add detail to the discussion of Clearing 
Participant requirements for direct settlement. Specifically, ICC 
proposes clarifying that, under the direct settlement model, Clearing 
Participants are responsible for ensuring that ICC has timely received 
all requested payments. If timely payment is not received, the Clearing 
Participant may be declared to be in default of its obligations to ICC. 
This proposed addition is meant to clarify ICC's existing 
practices.\28\
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    \28\ Id.
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    In relation to the description of ICC's daily settlement process in 
the Treasury Policy, ICC proposes additions that would describe current 
practice.\29\ To that end, the Treasury Policy would be updated to 
explain that ICC's daily settlement process occurs with each Clearing 
Participant every business day as applicable, and that settlement is 
final and irrevocable at the earlier of the time when (i) ICC receives 
the relevant payment or (ii) a financial institution used by ICC sends 
a confirmation message to ICC confirming that the relevant payment has 
been made.
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    \29\ Id.
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    ICC's amendments would also add detail to the Custodial Assets 
section of the Treasury Policy. ICC proposes clarifying that its 
policies regarding acceptable forms of cash and non-cash collateral for 
Initial Margin and Guaranty Fund and their associated ``haircuts'' are 
designed to provide protection for market risk management in addition 
to liquidity risk management. Additionally, ICC's proposed changes to 
the excess collateral sub-section would require that Clearing 
Participant requests to transfer excess collateral be completed prior 
to 9 a.m. ET for GBP denominated collateral in addition to EUR 
denominated collateral in order to receive the assets on the same day. 
ICC proposes this change because currently the sub-section does not 
contain the applicable GBP deadline for the transfer of excess GBP 
denominated collateral.\30\
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    \30\ Id. at 73737.
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    In the treasury reconciliations section, the Proposed Rule Change 
would clarify that ICC's Treasury Department conducts a daily 
reconciliation process with respect to its cash and non-cash collateral 
accounts in accordance with its internal procedures.\31\ ICC also 
proposes clarifying that ``cite checks'' involve the manual review of 
transaction activity rather than the manual review of the ISG requests. 
In ICC's view, this would be a clarifying change because the term ``ISG 
requests'' is vague and undefined.\32\
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    \31\ Id. These procedures include cite checks for validating the 
status of margin payments; a check of prior-day cash balances, 
withdrawals, and/or deposits; and a comparison of current and 
expected balances.
    \32\ Id. at 73737.
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4. Proposed Changes That Broaden Certain Provisions

    The Proposed Rule Change also increases certain provisions' 
breadth. In the section of the Treasury Policy covering the Treasury 
Department's responsibilities, the current term ``settlement issues'' 
would be replaced with the term ``treasury management related issues.'' 
As a result of this proposed change, the Treasury Policy

[[Page 101668]]

would specify that the Treasury Department is responsible for 
maintaining relationships and contacts with Clearing Participants to 
efficiently and effectively identify, validate, escalate and correct 
``treasury management related issues'' rather than ``settlement 
issues.'' ICC also proposes replacing the phrase ``substitute 
collateral for cash'' with the phrase ``perform collateral 
substitutions'' in another provision in the same section. As a result 
of this change, the Treasury Policy would describe the Treasury 
Department as being responsible for managing the process whereby 
Clearing Participants ``perform collateral substitutions'' instead of 
the process whereby Clearing Participants ``substitute collateral for 
cash.'' ICC proposes these changes to provide a more complete picture 
of its current payment practices.\33\ Additionally, the Proposed Rule 
Change would replace the word cash with the word collateral in a 
separate provision. As a result of this proposed change, the Treasury 
Department would be required to work to develop ``investment and 
collateral'' management strategies rather than ``investment and cash'' 
management strategies. In ICC's view, this change would more fully 
describe the scope of ICC's current practice and be consistent with the 
rest of the Treasury Policy.\34\
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    \33\ Id. at 73735.
    \34\ Id.
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    The Proposed Rule Change would also broaden the Funds Management 
section of the Treasury Policy. In this section's discussion of 
investment of Guaranty Fund and Margin requirements posted in US Dollar 
cash, ICC proposes adding that bilateral reverse repo transactions may 
be settled through alternative counterparties that may be added to the 
Treasury Policy in the future. The policy already notes that these 
repos are settled through a specific bank or additional counterparties 
that may be added in the future. This proposed addition aims to 
encompass potential future changes in ICC's financial service provider 
relationships.\35\
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    \35\ Id.
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    In the Treasury Policy's Cash Settlement section, ICC proposes 
changing how it describes its settlement banking relationships. 
Currently, ICC provides the names of its backup settlement banks in a 
subsection of the Treasury Policy addressing its banking relationships. 
Instead of naming specific backup settlement banks in one provision, 
ICC proposes that the provision indicate that ICC maintains appropriate 
backup settlement banking relationships. In the same subsection, ICC 
also proposes conforming changes related to this proposed change. 
Similarly, when addressing bank to bank and credit SWIFT messages, 
ICC's proposal would remove a reference to ICC's specific settlement 
banks and instead refer to ``applicable ICC settlement banks.'' These 
changes would help ICC avoid amending the Treasury Policy if its 
specific settlement banks it uses change.\36\ ICC's amendments would 
also add text to a subsection discussing when settlement banks fail to 
perform. This text currently lists specific banks that ICC's Treasury 
Department would instruct Clearing Participants to wire funds to 
directly if they do not pay because a settlement bank failed to 
perform. The Proposed Rule Change would add a new bank to the current 
list. It would also provide that if a settlement bank does not perform, 
ICC's Treasury Department would instruct the Clearing Participant to 
wire funds directly to ICC's accounts at alternative or additional 
settlement banks. These changes would broaden the list of settlement 
banks that ICC may designate.\37\
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    \36\ Id. at 73736.
    \37\ Id.
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    ICC also proposes replacing references to specific types of SWIFT 
messages with more general descriptions. Making this change would 
account for potential changes to specific types of SWIFT messages.\38\
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    \38\ Id. at 73736. Similar changes are made throughout the 
Treasury Policy.
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    ICC proposes broadening provisions in the Custodial Assets section 
of the Treasury Policy as well. Currently, the Treasury Policy provides 
that ICC accounts for the risk associated with changes in the value of 
US Treasuries and non-USD currencies by applying ``haircuts.'' \39\ The 
amendments would instead provide that ICC accounts for the risk 
associated with fluctuations in the value of cash and non-cash 
collateral by applying ``haircuts.'' ICC proposes this change because 
ICC accepts more than just U.S. Treasuries and non-USD currencies as 
collateral.\40\
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    \39\ ICE Clear Credit LLC Treasury Operations Policies and 
Procedures.
    \40\ Notice, 89 FR at 73737.
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5. Proposed Corrections to the Treasury Policy

    ICC also proposes to make various corrections to the Treasury 
Policy. In the Treasury Department Responsibilities section of the 
Treasury Policy, ICC proposes replacing a reference to margin 
requirements with a more general reference to requirements, a reference 
to margin deficit payments with a reference to payments, a reference to 
margin accounts with a reference to accounts, and a reference to the 
daily margin process with a reference to the daily clearing process. 
These proposed changes would improve the accuracy of the Treasury 
Policy because, in practice, the references to requirements, payments, 
accounts, and processes are not limited solely to margin.\41\ The 
Proposed Rule Change would also indicate that ICC, rather than ICC's 
Risk Department, generates daily requirements for all Clearing 
Participants (including requirements for indirect participants, i.e., 
Client-Related requirements). ICC's entity-wide clearing systems 
automatically create these requirements, not the ICC Risk 
Department.\42\ The Proposed Rule Change would also modify the 
description of these requirements to indicate that they would be based 
on ``cleared positions'' rather than ``cleared trades.'' In ICC's view, 
the word ``positions'' better describes Clearing Participants' cleared 
activity at ICC.\43\ ICC also proposes correcting text related to 
receipt of payments under the Treasury Policy.\44\ Currently, the 
Treasury Policy notes that Treasury ensures that payments are received 
and honored by Clearing Participant's CDS related banking 
relationships. Because ICC does not base its settlement of transactions 
on whether a Clearing Participant's bank honors a payment direction, 
ICC proposes correcting this text to note that Treasury ensures that 
payments are received from Clearing Participants.\45\ ICC also proposes 
removing text reading, ``within the Risk Management framework of the 
clearing house'' from a provision that currently reads ``working within 
the Risk Management framework of the clearing house to develop 
investment and cash management strategies.'' The proposed rule change 
would require the Treasury Department to work to develop investment and 
collateral management strategies.\46\ ICC proposes removing the Risk 
Management Framework language from this provision because the relevant 
investment and collateral management policies are now housed in the 
Treasury Policy instead of the Risk Management Framework.\47\ In the 
Treasury Department Organizational Structure and Governance section of 
the Treasury

[[Page 101669]]

Policy, ICC proposes removing text indicating that the Treasury 
Department is part of ICC's Operations Department. The Treasury 
Department is not and has never been a part of the Operations 
Department.\48\
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    \41\ Id. at 73734.
    \42\ Id.
    \43\ Id.
    \44\ Id.
    \45\ Id.
    \46\ ICC's proposed replacement of cash management strategies 
with collateral management strategies is described above in Section 
4.
    \47\ Notice, 89 FR at 73735.
    \48\ Id.
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    ICC also proposes corrections to the Funds Management section of 
the Treasury Policy. Specifically, ICC would replace certain current 
references to the Treasury Director making investments with statements 
that the Treasury Department makes these investments. ICC proposes 
these changes because it is ICC's practice for Treasury Department 
personnel to make these investments under the Treasury Director's 
supervision.\49\
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    \49\ Id.
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    In the Funds Management section's discussion of investment of US 
Dollar cash posted as Margin or to the Guaranty Fund, ICC proposes a 
change to reflect that ICC has multiple FRB accounts rather than a 
single FRB account.\50\ ICC also proposes changing the description of 
the minimum cash it is required to invest in a bilateral reverse repo 
under certain circumstances. The current description states that the 
minimum cash requirement is equal to 45% of the top two Clearing 
Participant's ``risk margin,'' plus any excess margin not released, 
plus 45% of the total Guaranty Fund. The revised description would 
state that the minimum cash requirement is equal to 45% of the top two 
Clearing Participant's ``Margin requirement,'' plus any excess margin 
not released, plus 45% of the total Guaranty Fund. ICC believes this 
change better reflects ICC's current practices because it is more 
detailed and accurate. ICC believes the term ``Margin requirement'' 
specifically includes both initial and mark-to-market margin 
requirements whereas the term ``risk margin'' is less specific.\51\ 
Where the Funds Management section discusses outside investment 
management of Guaranty Fund and Margin cash, ICC proposes using the 
plural term ``investment managers'' instead of the singular 
``investment manager'' because, in practice, ICC uses more than one 
outside investment manager to help it invest Guaranty Fund and Margin 
cash.\52\ In a discussion of liquidity protection, ICC's proposal would 
describe a requirement for Clearing Participants to maintain ``tiers of 
collateral'' rather than ``tiers of assets.'' This is because ICC 
believes the term ``collateral'' is more accurate in this instance 
because it is a more precise description.\53\
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    \50\ Id.
    \51\ Id.
    \52\ Id.
    \53\ Id.
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    ICC proposes corrections to the cash settlement section of the 
Treasury Policy as well. In relation to routine settlement procedures, 
the Treasury Policy currently indicates that, during the process of 
monitoring whether a Clearing Participant has made timely payment, if a 
Clearing Participant's payment is late ICC's Treasury Department 
contacts the Clearing Participant and/or the agent bank. Because ICC 
contacts the Clearing Participant directly if a payment is late and 
does not contact the agent bank, ICC proposes removing the reference to 
the agent bank.\54\ With respect to settlement procedures during a 
SWIFT outage, the current Treasury Policy indicates that in the event 
that ICC is unable to send SWIFT messages to its direct settlement 
banks, the following back-up procedures would be used. ICC proposes 
changes to this provision so that it indicates that in the event that 
ICC is unable to send SWIFT messages to ``Clearing Participant 
settlement banks,'' rather than ``direct settlement banks,'' it would 
use certain back-up procedures. This proposal corrects an incorrect 
reference to ``direct settlement banks'' in the current Treasury 
Policy.\55\ For the same reason, ICC proposes replacing the term 
``direct settlement banks'' with ``Clearing Participants'' in revisions 
to procedures for communicating directly with a Clearing Participant 
when there is a SWIFT outage.\56\ Specifically, ICC proposes changes to 
the Treasury Policy noting that when there is a SWIFT message 
disruption, it may become necessary to send a report directly to 
``ICC's Clearing Participants'' rather than ``ICC's direct settlement 
banks.'' As noted above, under the direct settlement model, ICC does 
not maintain accounts at each of the Clearing Participant settlement 
banks. Instead, ICC maintains direct debit authority over the Clearing 
Participant settlement bank accounts as such authority is granted by 
each Clearing Participant. Thus, it is more accurate to describe the 
settlement banks as they relate to ICC's Clearing Participants, rather 
than being ICC's direct settlement banks.
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    \54\ Id. at 73736.
    \55\ Id.
    \56\ Id.
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    ICC also proposes correcting language in the Treasury Policy 
related to its FRB accounts. Currently, a subsection of the Treasury 
Policy addressing ICC's FRB accounts addresses the possibility that ICC 
would have only one FRB account. Due to certain requirements that ICC 
segregate funds, ICC currently has separate FRB accounts for house and 
client margin. To reflect this, ICC would refer to ``accounts'' instead 
of an ``account'' or ``account(s)'' and remove outdated language 
focused on the possibility that ICC would have a single FRB account. 
ICC would also add text defining the terms House Account and Client 
Account,\57\ replace text to utilize those terms,\58\ and note that ICC 
maintains separate margin accounts for each Clearing Participant's 
House Positions and Client Positions.
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    \57\ ICC's proposal would also refer to the Client Account as a 
Cleared Swaps Customer Account. The Proposed Rule Change would 
incorporate these definitions throughout the Treasury Policy.
    \58\ Specifically, ICC proposes replacing FRB House cash account 
with FRB House Account and FRB Client cash account with FRB Client 
Account.
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    The Proposed Rule Change would also correct portions of the 
Custodial Assets section of the Treasury Policy and update reporting 
requirements for ICC's custodial banks. Instead of indicating that 
custodial banks are required annually to submit a specific report, the 
updated Treasury Policy would explain that custodial banks are subject 
to ongoing monitoring pursuant to ICC's Counterparty Monitoring 
Procedures, and the current requirement that custodial banks must 
submit the specific report to ICC would be removed.\59\ With respect to 
its collateral haircut methodology, ICC's proposed changes would 
require ICC's Treasury Department to provide a report containing 
current ``haircuts'' to the ICC Risk Department at least once a month 
rather than only once a month and, further, this requirement would no 
longer depend on whether the haircuts changed. Relatedly, ICC proposes 
changes to reflect its current practice of making its haircuts publicly 
available and notifying Clearing Participants of any changes to those 
haircuts.\60\ The current Treasury Policy notes only that ICC will 
establish and publish the haircuts to Clearing Participants monthly.
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    \59\ Notice, 89 FR at 73736.
    \60\ Id. at 73737.
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    In the Bank Monitoring section of the Treasury Policy, ICC proposes 
updating the current reference to the CDS Clearing Counterparty 
Monitoring Procedures to reflect that these procedures are now called 
the Counterparty Monitoring Procedures.\61\
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    \61\ Id.
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6. Proposed Deletions of Obsolete and Unnecessary Text

    ICC's proposal would delete unnecessary and obsolete language

[[Page 101670]]

throughout the Treasury Policy. In the description of the funds and 
requirements that ICC's Treasury Department manages, the Proposed Rule 
Change would remove a footnote identifying where to find the definition 
of Guaranty Fund because, under ICC's proposal, the location of this 
definition is now found in the Treasury Department Responsibilities 
section of the Treasury Policy.\62\
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    \62\ Notice, 89 FR at 73735.
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    ICC proposes changing the description of ICC's investment of US 
Dollar Cash posted as Margin or in the Guaranty Fund to remove language 
it deems unnecessary. Currently, a provision in this section indicates 
that, to facilitate reverse repo transactions, ICC has arrangements in 
place to settle reverse repo transactions, either by tri-party or 
bilateral, and that both arrangements settle delivery vs. payment. The 
proposed provision would instead note that, to facilitate reverse repo 
transactions, ICC has arrangements in place to settle reverse repo 
transactions delivery vs. payment. This section of the Treasury Policy 
also currently requires that when a security must be substituted, ICC 
will ensure the replacement security is eligible and is valued 
correctly by reviewing the replacement ticket issued by the 
counterparty. ICC proposes deleting this requirement in its entirety. 
In each case, ICC proposes the deletions because it does not believe 
that the Treasury Policy needs to discuss these matters at the current 
level of detail.\63\
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    \63\ Id.
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    The Proposed Rule Change would delete unnecessary provisions in the 
Cash Settlement section of the Treasury Policy as well. With respect to 
non-routine settlement procedures, the Treasury Policy current explains 
that if ICC must process a cash payment from a Clearing Participant 
outside of the normal daily process, an ICC authorized person will work 
with the Clearing Participant to confirm the particulars of the non-
routine settlement. The Treasury Policy currently further explains that 
ICC sends SWIFT MT-204(USD)\MT-202(EUR) settlement instructions to the 
designated bank via the SWIFT network. The proposed rule change would 
maintain the substance of this provision--ICC would work with the 
Clearing Participant to confirm settlement outside of the daily 
process--but it would delete the reference to the specific SWIFT 
message. ICC maintains that reference the specific SWIFT message is 
unnecessary because ICC and the Clearing Participant in question would 
be expected to separately confirm the particulars of the settlement, 
and further the type of SWIFT message could change in the future.\64\
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    \64\ Id. at 73736.
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    In the Treasury Policy's discussion of settlement procedures in the 
event of a SWIFT outage, the Proposed Rule Change would also remove the 
requirement that Margin Deficit Call Reports would be sent using a 
password protected email. The Treasury Policy currently explains that, 
in the event of a SWIFT outage, it may become necessary for ICC to 
manually send these reports,\65\ as needed to satisfy margin debit 
calls. The Treasury Policy currently explains that these Margin Deficit 
Call Reports would be sent using a password protected email. The 
Proposed Rule Change would remove the requirement that the email be 
password protected. Because ICC does not believe that email security 
measures need to be addressed in the Treasury Policy, the Proposed Rule 
Change would instead require Margin Deficit Call Reports to be sent via 
email.\66\ Thus, ICC would still send the Margin Deficit Call Reports 
via email, as needed, but the Treasury Policy would not contain a 
requirement that this email be password protected.\67\
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    \65\ As described in Section II.5, ICC proposes changes to the 
Treasury Policy to send these reports to ICC's Clearing Participants 
rather than ICC's direct settlement banks. See infra Section II.5.
    \66\ Notice, 89 FR at 73736.
    \67\ Nevertheless, per other ICC policies, such as the ICE 
Corporate Information and Security Policy, the Commission expects 
this information would be sent in a secure manner.
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    Currently, the Treasury Policy explains that, when a bank rejects a 
SWIFT debit message because of a technical defect, the Treasury 
Department will manually update the SWIFT Transaction Summary Report 
and will manually initiate and send a SWIFT MT202 (bank to bank) and/or 
MT204 (direct debit) message to reverse and/or correct previous 
message(s) to the bank. ICC would amend this text to indicate that the 
Treasury Department will correct the previous message(s) and/or re-
issue a corrected SWIFT message to the bank. Thus, rather than 
referring to the specific type of SWIFT message (i.e. MT202), the 
revised Treasury Policy would refer to SWIFT messages generally. This 
change would remove what ICC views as unnecessary detail regarding 
reissuing and correcting the SWIFT message and the specific type of 
SWIFT message that will be sent, and further helps ensure that the 
Treasury Policy remains accurate if the numbers of SWIFT messages are 
updated or otherwise changed.\68\
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    \68\ Notice, 89 FR at 73736.
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    ICC would also remove unnecessary text from the Treasury Policy's 
Custodial Assets section and Treasury Management for Client Business 
section. Specifically, ICC would remove outdated language contemplating 
a scenario where ICC only has one FRB securities account.\69\ ICC has 
multiple FRB securities accounts.\70\ Further, when discussing when 
client margin is due, ICC proposes removing text highlighting that 
ICC's deadlines are in keeping with daily payment processes. ICC states 
that it views this text as unnecessary.\71\ The remaining text would 
still note when payments related to client business are due to ICC.
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    \69\ Id.
    \70\ Id.
    \71\ Id. at 73737.
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    In Appendix 2 of the Treasury Policy, ICC would remove information 
related to its key contacts at a number of specific banks. 
Specifically, ICC proposes removing the names of banks for which it 
maintains a list of key contacts. ICC does not believe it needs to list 
this level of detail in the Treasury Policy because the specific banks 
are likely to change.\72\
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    \72\ Id.
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7. Proposed Changes for Consistency Purposes

    Finally, some of ICC's proposed changes are designed to ensure that 
the Treasury Policy is internally consistent with itself, other ICC 
rules and procedures, and external regulatory requirements. In the 
Funds Management Section of the Treasury Policy, ICC proposes to add 
the word ``requirements'' in multiple places to ensure that Margin and 
Guaranty Fund requirements are referred to consistently throughout the 
document.\73\ To ensure the Treasury Policy is consistent with other 
ICC rules and procedures, ICC proposes adding language to the Treasury 
Policy indicating that it maintains and manages House Margin and Client 
Margin separately.\74\ To ensure the Treasury Policy is consistent with 
certain regulatory requirements applicable to ICC, the Proposed Rule 
Change would require that Initial Margin and Guaranty Fund requirements 
are held in a manner

[[Page 101671]]

which minimizes the risk of loss or delay in ICC's access to 
collateral, which mirrors the language used in the relevant regulatory 
requirements.\75\ This would be a change from the current language, 
which indicates that Margin and Guaranty Fund requirements must be held 
in highly liquid and short term investments.
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    \73\ Notice, 89 FR at 73735. For example, ICC would add the word 
requirements to the introductory paragraph of the Funds Management 
section so that it notes that Treasury is responsible for developing 
investment strategies and managing each of the types of funds and 
requirements in accordance with their respective restrictions and 
ICC's Investment Policy. In another example, ICC proposes clarifying 
that the Treasury Department is responsible for cash and non-cash 
collateral originating from Initial Margin requirements posted by 
Clearing Participants.
    \74\ Id.
    \75\ Id.
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    The text and titles in and around several tables in the Funds 
Management section of the Treasury Policy would also be changed to 
ensure they are consistent with other sections of the Treasury 
Policy.\76\ Specifically, in these tables ICC proposes using the terms 
``USD cash'' instead of ``US Dollar Cash'' and ``US Cash,'' ``US 
Treasury Securities'' instead of ``US Treasuries,'' and ``EUR cash'' 
instead of ``Euro Cash'' to mirror the terms used in the rest of the 
revised Treasury Policy.\77\ ICC also proposes using defined terms 
throughout the Treasury Policy, such as House Margin.
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    \76\ Id.
    \77\ Similar changes are made throughout the Treasury Policy.
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    ICC proposes changes to the Participants' Withdrawal subsection of 
the Funds Management section as well. Specifically, ICC would add text 
indicating that Guaranty Fund deposits are not eligible to be returned 
to a withdrawing Clearing Participant until after all of the open 
positions of such withdrawing Clearing Participant are closed out and 
all obligations of such withdrawing Clearing Participant to ICC have 
been satisfied. ICC proposes this change to make this provision 
consistent with Rule 807 of the ICC Rulebook. Similarly, a current 
provision in the Participants' Withdrawal subsection indicates that, if 
a Clearing Participant provides notice of withdrawal less than 60 days 
from the end of the quarter, the Clearing Participant's withdrawal will 
be effective at the end of the subsequent calendar quarter. However, 
because this is not consistent with or required under ICC's rules, the 
Proposed Rule Change would delete this provision from the Treasury 
Policy.\78\
---------------------------------------------------------------------------

    \78\ Id. at 73735.
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    Finally, in the section of the Treasury Policy discussing ICC's use 
of committed repo facilities, ICC proposes modifying certain text 
describing how expenses are attributed. Currently, the Treasury Policy 
indicates that interest expenses incurred through such facilities are 
attributed to the account of the defaulting Clearing Participant. ICC's 
proposal would indicate that all expenses incurred through such 
facilities, including interest expenses, are attributed to the account 
of the defaulting Clearing Participant. ICC indicates that this 
proposed change is consistent with the approach for allocation of 
close-out costs to a defaulter under ICC's Rulebook.\79\
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    \79\ Id.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act requires the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the 
organization.\80\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act \81\ and Rule 17Ad-22(e)(7) \82\ and (e)(16).\83\
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    \80\ 15 U.S.C. 78s(b)(2)(C).
    \81\ 15 U.S.C. 78q-1(b)(3)(F).
    \82\ 17 CFR 240Ad-22(e)(7).
    \83\ 17 CFR 240Ad-22(e)(16).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Under Section 17A(b)(3)(F) of the Act, ICC's rules, among other 
things, must be ``designed to promote the prompt and accurate clearance 
and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions'' and 
``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.'' \84\ Based on a review of the record, and for the 
reasons discussed below, ICC's proposed rule change is consistent with 
Section 17A(b)(3)(F).
---------------------------------------------------------------------------

    \84\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Among other things, the Proposed Rule Change updates the Treasury 
Policy by adding additional detail to various provisions and making 
various clarifications.\85\ For example, the Proposed Rule Change would 
better explain what the Treasury Department does; define specific 
terms, such as Margin, and use those terms consistently throughout the 
Treasury Policy; and align the language and descriptions used in the 
Treasury Policy with ICC's current practices, such as assigning 
responsibility for ICC's timely receipt of requested payments to the 
Clearing Participants under the direct settlement model.
---------------------------------------------------------------------------

    \85\ Notice, 89 FR at 73734.
---------------------------------------------------------------------------

    The Proposed Rule Change also updates the Treasury Policy by 
correcting certain inaccuracies within the policy, deleting unnecessary 
language, and making various conforming changes to ensure that the 
Treasury Policy is internally consistent with itself, consistent with 
other ICC policies and rules, and consistent with external rules. For 
example, because relevant investment and collateral management policies 
are now housed in the Treasury Policy instead of the Risk Management 
Framework, ICC would remove language indicating that developing 
investment and collateral management strategies could only be performed 
within ICC's Risk Management Framework. As a result, ICC's Treasury 
Department will be required to work to develop investment and 
collateral management strategies irrespective of whether it does so 
within ICC's Risk Management Framework. The Treasury Policy would also 
be updated to correctly identify the parties responsible for investing 
certain funds, correctly identify certain procedures referenced within 
the Treasury Policy, and make changes reflecting that ICC has more than 
one FRB account and more than one investment manager. ICC would also 
remove what it believes are unnecessary details from certain provisions 
of the Treasury Policy, such as information identifying specific types 
of repo transactions and specific information regarding email security. 
To help ensure the Treasury Policy is both internally and externally 
consistent, the Proposed Rule Change would revise the Treasury Policy 
to indicate that ICC manages House Margin and Client Margin 
separately--consistent with other ICC policies and procedures--and 
modify certain terms used in the Treasury Policy to mirror the terms 
used elsewhere in the Treasury Policy and in other ICC rules. These 
changes also improve the clarity of the Treasury Policy and decrease 
the possibility for error in using and applying the Treasury Policy. 
Moreover, eliminating unnecessary details and provisions from the 
Treasury Policy helps ensure both that it will need to be amended less 
frequently in the event those details change and that, in the event 
revisions are necessary, that such revisions are less prone to error. 
Avoiding errors in the amendment process also improves their clarity as 
a whole and decreases the possibility for error in applying them.
    The Proposed Rule Change would also expand certain provisions in 
the Treasury Policy by replacing specific terms in the Treasury Policy 
with more general terms and adding broadening language to existing 
text. For example, in certain instances, ICC would refer to collateral 
generally instead of more specific forms of collateral. ICC would

[[Page 101672]]

also account for potential changes in banking relationships and SWIFT 
messages by referring to these relationships and messages more 
generally. Taken together, the use of these broader, more general terms 
would immediately improve the accuracy of the Treasury Policy and help 
ensure that it remains accurate in the event there are non-substantive 
changes to ICC's banking relationships and the specific types of SWIFT 
messages that ICC uses.
    By adding additional details and clarifications, correcting 
inaccuracies, deleting unnecessary language, making conforming changes 
to ensure internal and external consistency, and replace unnecessarily 
specific terms with broader, more general terms, the Proposed Rule 
Change helps ensure that the Treasury Policy is and will remain clear, 
consistent, and current, which in turn decreases the likelihood that 
the Treasury Policy and its provisions will be applied erroneously or 
inconsistently. This decreases the likelihood of ICC's mismanagement of 
collateral, which facilitates the prompt and accurate clearance and 
settlement of transactions and assures the safeguarding of securities 
and funds within ICC's custody or control.
    ICC also proposes adding additional criteria for settlement banks. 
Because settlement banks ultimately custody the funds that Clearing 
Participants will use to satisfy their obligations to ICC, ICC needs 
visibility into a settlement bank's liquidity. To ensure that ICC has 
such visibility, the Proposed Rule Change would update the Treasury 
Policy to require that settlement banks provide specific liquidity 
information to ICC. An example of the liquidity information that ICC 
requires from settlement banks is the banks' Liquidity Coverage Ratio. 
In the event that the bank does not report LCR, the Proposed Rule 
Change would specify that ICC will consider other criteria to assess 
the liquidity of the bank. These other criteria may include a 
description of the bank's liquidity risk management policy or the 
liquidity coverage ratio of the settlement bank's affiliated reporting 
entity within the bank's group. Ensuring that ICC has this information 
will help ICC avoid a relationship with a settlement bank that is 
unable to satisfy obligations on a Clearing Participant's behalf, 
despite the Clearing Participant being financially sound. Preventing 
relationships with illiquid settlement banks would help facilitate the 
prompt and accurate clearance and settlement of transactions and assure 
the safeguarding of securities and funds within ICC's custody or 
control.
    Finally, ICC proposes changes to its investment guidelines. 
Specifically, ICC proposes eliminating the restriction that it may only 
invest in certain U.S. Treasury Securities when bank deposits or 
Treasury/Agency reverse repos become unavailable or are not feasible. 
The Proposed Rule Change would specify that ICC would primarily 
directly invest in U.S. Treasury securities with respect to stable 
balances, for example, restricted cash held for regulatory purposes. 
ICC proposes this change because it believes the change would give it 
greater flexibility while preserving the quality of investments. ICC 
also proposes requiring the value of collateral in the case of a 
reverse repo to be fixed at 102 percent instead of ranging between 
100.5 percent to 102 percent. Given the safety of these investments, 
ICC's proposal to potentially invest cash held for regulatory purposes 
in U.S. Treasury securities is consistent with the safeguarding of 
securities and funds within ICC's custody or control.\86\ Further, 
ICC's proposal to ensure that the value of collateral will always be 
102 percent in a reverse repo provides ICC with greater protection in 
the event that it provides cash to an entity in exchange for the 
entity's promise to repurchase a security from ICC at a higher price 
because it helps to ensure that ICC will receive a larger amount if an 
entity is unable to purchase securities back at the agreed upon price. 
This protects ICC as it invests its cash balances and therefore is 
consistent with the safeguarding of securities and funds within ICC's 
control.
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    \86\ Certain maturity limitations will still apply to the U.S. 
Treasuries in which ICC is allowed to invest. Id. at 73738.
---------------------------------------------------------------------------

    Accordingly, the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.\87\
---------------------------------------------------------------------------

    \87\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(7)

    Rule 17Ad-22(e)(7) requires ICC to ``establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to . . . effectively measure, monitor, and manage the 
liquidity risk that arises or is borne by the covered clearing agency . 
. . by at a minimum . . . undertaking due diligence to confirm that it 
has a reasonable basis to believe each of its liquidity providers, 
whether or not such liquidity provider is a clearing member, has . . . 
the capacity to perform as required under its commitments to provide 
liquidity to the covered clearing agency.'' \88\ Based on a review of 
the record, and for the reasons discussed below, ICC's proposed rule 
change is consistent with Rule 17Ad-22(e)(7).
---------------------------------------------------------------------------

    \88\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------

    The Proposed Rule Change would add to ICC's minimum criteria for 
settlement banks by requiring that a settlement bank provide specific 
liquidity information such as the Liquidity Coverage Ratio. Obtaining 
this information can help ensure that ICC is able to determine whether 
a settlement bank with which it has a relationship is facing liquidity 
issues. Performing such diligence is consistent with the requirements 
of Rule 17Ad-22(e)(7) because a settlement bank's liquidity issues may 
prevent an otherwise liquid Clearing Participant from satisfying its 
obligations.
    Accordingly, that the proposed rule change is consistent with the 
requirements of Rule 17Ad-22(e)(7).\89\
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    \89\ 17 CFR 240.17Ad-22(e)(7).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(16)

    Rule 17Ad-22(e)(16) requires ICC to ``establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to . . . safeguard the covered clearing agency's own and its 
participants' assets, minimize the risk of loss and delay in these 
assets, and invest such assets in instruments with minimal credit, 
market, and liquidity risks.'' \90\ Based on a review of the record, 
and for the reasons discussed below, ICC's proposed rule change is 
consistent with Rule 17Ad-22(e)(16).
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    \90\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------

    As noted above, ICC proposes eliminating the restriction that it 
may only invest its operating capital in certain U.S. Treasury 
Securities when bank deposits or Treasury/Agency reverse repos become 
unavailable or are not feasible. While ICC is not required to invest 
its own or its Participants' assets, if it does so, it generally should 
seek to minimize the risk of loss or delay in access to the invested 
assets by investing in highly liquid assets.\91\ The Commission has 
previously stated that U.S. Treasury securities are highly liquid.\92\ 
ICC's proposal to invest its assets in U.S. treasury securities is 
therefore consistent with Rule 17Ad-22(e)(16).
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    \91\ Securities Exchange Act Release No. 78961 (Sept. 28, 2016), 
81 FR 70786, 70837 (Oct. 13, 2016) (File No. S7-03-14).
    \92\ Id.
---------------------------------------------------------------------------

    Accordingly, the Proposed Rule Change is consistent with the 
requirements of Rule 17Ad-22(e)(16).\93\
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    \93\ 17 CFR 240.17Ad-22(e)(16).

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[[Page 101673]]

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act, 
and in particular, Section 17A(b)(3)(F) of the Act \94\ and Rule 17Ad-
22(e)(7) \95\ and (e)(16) thereunder.\96\
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    \94\ 15 U.S.C. 78q-1(b)(3)(F).
    \95\ 17 CFR 240.17Ad-22(e)(7).
    \96\ 17 CFR 240.17Ad-22(e)(16).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-ICC-2024-005) be, and hereby is, 
approved.\97\
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    \97\ In approving the proposed rule change, the Commission 
considered the proposal's impacts 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.\98\
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    \98\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29474 Filed 12-13-24; 8:45 am]
BILLING CODE 8011-01-P
```