www.theice.com

Intercontinental Exchange

353 North Clark, Suite 3100

Chicago, IL 60654

Maria Zyskind

Staff Attorney

July 11, 2018

Re: Updates to ICC Rules Pursuant to 

Section 5c(c)(1) of the Commodity Exchange 

Act and Commission Regulation 40.6(a)

VIA ELECTRONIC PORTAL

Mr. Christopher Kirkpatrick

Secretary

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, D.C. 20581

Dear Mr. Kirkpatrick:

ICE Clear Credit LLC (“ICC”) hereby submits, pursuant to Section 5c(c)(1) of the Commodity Exchange 

Act and Commodity Futures Trading Commission (“Commission”) Regulation 40.6(a), a self-certification 

of changes to the ICC Clearing Rules (the “Rules”) to more clearly characterize Mark-to-Market Margin 

payments as settlement payments (“settled-to-market”) rather than collateral (“collateralized-to-market”).

ICC is registered with the Commission as a derivatives clearing organization (“DCO”). ICC intends to 

implement the changes no sooner than the tenth business day following the filing of this submission with 

the Commission at its Washington, D.C. headquarters and with its Chicago regional office.

ICC proposes revisions to Chapters 4, 8, and 20 of the ICC Rules to more clearly characterize Mark-toMarket Margin payments as settled-to-market rather than collateralized-to-market. This submission 

includes a description of the changes to the ICC Rules. Certification of the changes pursuant to Section 

5c(c)(1) of the Act and Commission Regulation 40.6(a) is also provided below.

Under the settled-to-market model, the transfer of Mark-to-Market Margin constitutes a settlement of the 

contract’s outstanding exposure, with the receiving party taking outright title to the Mark-to-Market Margin 

and the transferring party retaining no rights to such margin. Under the collateralized-to-market model, 

the transfer of Mark-to-Market Margin constitutes a pledge of collateral, such that the transferring party 

has a right to reclaim the collateral and the receiving party has an obligation to return the collateral.1 

ICC previously revised the Rules in 2015 to clarify that Mark-to-Market Margin constituted a settlement 

payment. Such revisions did not result in a change in the manner in which Mark-to-Market Margin was 

calculated, paid or collected, and were intended to provide further clarity regarding the finality of ICC’s 

settlement cycle.2ICC is proposing additional clarifying changes to the Rules. As with the prior changes, 

the proposed amendments do not change the manner in which Mark-to-Market Margin is calculated, or 

other current ICC operational practices. Rather, such changes consist of additional revisions to 

 

1 Use of a settled-to-market model, rather than a collateralized-to-market model, is consistent with 

requirements applicable to a DCO, as interpreted by the Commission staff. Commission Interpretive 

Letter No. 17-51 (Oct. 12, 2017) (“Commission Letter”). Use of a settled-to-market model also may result 

in more favorable capital treatment for positions in cleared derivatives for market participants that are 

subject to regulations of U.S. banking supervisors implementing the Basel III capital framework. See 

Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal 

Deposit Insurance Corporation, Regulatory Capital Treatment of Certain Centrally-cleared Derivative 

Contracts Under Regulatory Capital Rules (Aug. 14, 2017). 

2

ICC filing submitted to the Commission on April 16, 2015. 
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terminology to further clarify the legal characterization that payments of Mark-to-Market Margin represent 

settlement rather than collateral payments. These clarifying changes result from further legal analysis with 

respect to ICC’s characterization of Mark-to-Market Margin payments as settlement rather than as posting 

of collateral, as requested by its Clearing Participants (“CPs”). The proposed revisions are described in 

detail as follows.

ICC proposes revising Rule 401 to reference Mark-to-Market Margin Balance, a new term that is defined 

in Rule 404 and refers to the aggregate amount of Mark-to-Market Margin paid or received. The term is 

used in several calculations, avoids the need to repeat the definition, and allows ICC to more clearly and 

fully describe specifics pertaining to its Mark-to-Market Margin calculation in a single section without 

combining it with other concepts. ICC proposes adding language to Rule 401(a), which governs House 

Margin, to state that ICC calculates a net amount of Mark-to-Market Margin by subtracting a CP’s Markto-Market Margin Balance from a CP’s Mark-to-Market Margin Requirement. ICC proposes corresponding 

changes referencing Mark-to-Market Margin Balance in Rule 401(b)(ii), which covers Client-Related Markto-Market Margin. Such changes are not intended to modify the current calculation of Mark-to-Market 

Margin, or other operational practices, but, instead, replace certain specifics relating to ICC’s Mark-toMarket Margin calculation with the defined term. The amendments do not change the manner in which 

Initial Margin is calculated, posted and held.

Further, ICC proposes to specify that a CP’s Mark-to-Market Margin Balance is adjusted by an amount 

called the price alignment amount in revised Rule 401(g). Specifically, ICC proposes to state that it will 

pay or charge a CP price alignment amounts on any Mark-to-Market Margin and interest on any cash 

Initial Margin at a rate that may be negative. A price alignment amount is economically equivalent to the 

“interest” that ICC pays or charges a CP for any net Mark-to-Market Margin transferred between the 

parties under current Rule 401(g). However, since the term interest may be more typically associated with 

collateral, ICC proposes to refer to such an amount as price alignment to avoid confusion over the proper 

characterization of Mark-to-Market Margin as settlement payments.3 Such change will not affect 

operations, since ICC will continue to pay or charge a CP an amount, which serves the same purpose 

and is calculated identically, for any net Mark-to-Market Margin transferred between the parties. ICC also 

proposes separate clarifying language to note that the rate at which it pays or charges such an amount 

may be negative, to more clearly address the possibility of negative market rate environments. 

ICC proposes to specifically reference the applicable category of margin to avoid confusion over the 

proper characterization of Mark-to-Market Margin under the ICC Rules. ICC proposes to update Rule 

401(h) to refer to substitutions of Initial Margin, and Rule 401(l) to refer to settlement finality in relation to 

Mark-to-Market Margin. The proposed changes to Rule 402, which governs ICC’s rights with respect to 

the use of margin, exclude Mark-to-Market Margin from subsections (a) and (b), remove details relating to 

Mark-to-Market Margin from subsection (b), and specify subsection (c)’s applicability to Initial Margin. ICC 

proposes adding language to Rule 402(e) to more clearly state that Mark-to-Market Margin payments 

constitute a settlement. Further, ICC proposes adding new subsection (c) to Rule 404 to define Mark-toMarket Margin Balance as a sum equal to the Mark-to-Market Margin value transferred by the CP to ICC 

minus the Mark-to-Market Margin value transferred by ICC to the CP. To avoid uncertainty, ICC also 

proposes to specifically reference the applicable category of margin in Rule 406(c). Namely, ICC 

proposes to clarify that the requirements set forth in Rule 406(c) regarding Client-Related Positions apply 

to Initial Margin. 

ICC proposes clarifications and conforming changes to Chapters 8 and 20 of the ICC Rules. ICC 

proposes clarifying language in Rule 801(a)(i) to refer to the transfer of Mark-to-Market Margin to avoid 

confusion over the proper characterization of Mark-to-Market Margin as settlement payments, since ICC 

considers the loss after the application of Initial Margin and taking into account settlement of Mark-toMarket Margin to be uncollateralized loss. Under the proposed updates, Rule 808 includes a conforming 

reference to Mark-to-Market Margin Balance. The proposed changes to Rule 810(e) replace terminology 

that is commonly used in conjunction with collateral to avoid confusion over the proper characterization of 

 

3 See Commission Letter, supra, for a discussion of the use of price alignment amount instead of 

price alignment interest. 
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Mark-to-Market Margin as settlement payments. ICC proposes to clarify in Rule 20-605(c)(i)(B), which 

specifies the resources to be used to cover losses with respect to Client-Related Positions, that ICC will 

use the defaulting CP’s Client-Related Mark-to-Market Margin, to the extent not previously applied to pay 

Mark-to-Market Margin to other CPs. 

Core Principle Review:

ICC reviewed the DCO core principles (“Core Principles”) as set forth in the Commodity Exchange Act. 

During this review, ICC identified the following Core Principle as being impacted:

Settlement Procedures: The revisions to the ICC Rules are intended to provide additional clarity regarding 

ICC’s settlement procedures and thus are consistent with the requirements of Core Principle E. 

Amended Rules:

The proposed changes consist of changes to Chapters 4, 8, and 20 of the ICC Rules to more clearly 

characterize Mark-to-Market Margin payments as settled-to-market rather than as collateralized-tomarket.

Annexed as an Exhibit hereto is the following:

A. Proposed amendments to the ICC Rules

Certifications:

ICC hereby certifies that the changes comply with the Act and the regulations thereunder. There were no 

substantive opposing views to the changes.

ICC further certifies that, concurrent with this filing, a copy of the submission was posted on ICC’s 

website, and may be accessed at: https://www.theice.com/clear-credit/regulation

ICC would be pleased to respond to any questions the Commission or the staff may have regarding this 

submission. Please direct any questions or requests for information to the attention of the undersigned at 

(312) 836-6854.

Sincerely,

Maria Zyskind

Staff Attorney