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


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SECURITIES AND EXCHANGE COMMISSION

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


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change To Revise the ICC Clearing Rules and the 
ICC Treasury Operations Policies and Procedures

August 14, 2017.

I. Introduction

    On June 16, 2017, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2017-010) 
to make changes to the ICC Clearing Rules (the ``ICC Rules'') and ICC 
Treasury Operations Policies and Procedures (``Treasury Policy'') to 
remove eligibility of Japanese yen (``JPY''), Great British pounds 
(``GBP''), and Canadian dollars (``CAD'') to meet Initial Margin 
(``IM'') and Guaranty Fund (``GF'') requirements. The proposed rule 
change was published for comment in the Federal Register on July 5, 
2017.\3\ The Commission received no comment letters regarding the 
proposed change. For the reasons discussed below, the Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-81037 (June 28, 
2017), 82 FR 31121 (July 5, 2017) (SR-ICC-2017-010) (``Notice'').
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II. Description of the Proposed Rule Change

    ICC has proposed changes to Schedule 401 of the ICC Rules and to 
its Treasury Policy. The proposed changes would remove JPY, GBP, and 
CAD from eligibility to meet IM and GF requirements. Currently, a 
Clearing Participant may meet the final 35% of their IM and GF 
requirements with JPY, GBP, or CAD, in aggregate. Under the proposed 
revisions, Clearing Participants would continue to be able to meet 
their IM and GF requirements using Euro cash, U.S. cash, and/or U.S. 
Treasuries, in accordance with the applicable collateral thresholds.
    Specifically, with respect to Schedule 401 of the ICC Rules, ICC 
proposed removing references to G7 cash (which includes U.S. cash, Euro 
cash, JPY, GBP, and CAD) and defining ``All Eligible Collateral'' for 
both Non-Client IM and GF Liquidity Requirements and Client-Related IM 
Liquidity Requirements to be US cash, Euro cash, and/or U.S. 
Treasuries. Under the proposed changes, U.S. cash, Euro cash, and/or 
U.S. Treasuries would be eligible for meeting the final 35% of IM and 
GF requirements for all Non-Client IM and GF Liquidity Requirements and 
Client-Related U.S. dollar (``USD'') denominated IM Requirements; and 
U.S. cash, Euro cash, and/or U.S. Treasuries would be eligible for 
meeting a maximum of 100% of IM requirements for Client-Related Euro-
Denominated Product Requirements.
    In addition, ICC proposed to update its Treasury Policy to remove 
references to JPY, GBP, and CAD as eligible collateral. Under the 
proposed changes, ICC would remove references to JPY, GBP, and CAD in 
the ``Collateral Liquidation Assumptions'' tables (for both Euro and 
USD denominated requirements). ICC would also update the ``Eligible 
Client Collateral'' section of the Treasury Policy to note that its 
eligible collateral for client IM includes U.S. cash, Euro cash, and 
U.S. government securities in line with current eligible collateral for 
House exposures (i.e., U.S. Treasuries). ICC also would revise the 
``Client-Related

[[Page 39485]]

IM Liquidity Requirements'' section of the Treasury Policy to reflect 
the proposed liquidity requirement changes, namely USD-denominated 
product requirements of 65% cash and/or U.S. Treasuries, and 35% 
remainder eligible U.S. cash, U.S. Treasuries, and/or Euro cash; and 
Euro-denominated product requirements of 100% U.S. cash, Euro cash, 
and/or U.S. Treasuries. The proposed changes also include removing 
reference to G7 cash and including U.S. Treasury securities, U.S. cash, 
and Euro cash as eligible collateral from the House IM and GF Liquidity 
Requirements (for Non-Client USD and Euro-denominated requirements) 
chart, the list of acceptable forms of collateral for IM, and the list 
of acceptable forms of collateral for the GF).

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. Section 17A(b)(3)(F) of the Act \5\ 
requires, among other things, that the rules of a registered clearing 
agency be designed to promote the prompt and accurate clearance and 
settlement of securities transactions and, to the extent applicable, 
derivative agreements, contracts, and transactions, to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible and, in 
general, to protect investors and the public interest. Rule 17Ad-
22(d)(3) \6\ requires that a registered clearing agency shall 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to hold assets in a manner that 
minimizes risk of loss or of delay in its access to them.
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 17 CFR 240.17Ad-22(d)(3).
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    The Commission finds that the proposed rule change, which removes 
JPY, GBP, and CAD from eligibility to meet IM and GF requirements, is 
consistent with Section 17A of the Act and Rule 17Ad-22 thereunder. 
According to ICC, ICC would need to convert JPY, GBP, and CAD into 
another currency in order to use them to satisfy obligations arising 
from the products that ICC clears, which are denominated only in USD or 
Euros. Therefore, from ICC's perspective, JPY, GBP, and CAD are not as 
liquid as USD or Euros for purposes of ICC's business activities. 
Moreover, ICC has noted that JPY has a significant timing issue related 
to conversion. ICC also expressed the view that, from a practical 
standpoint, these changes should have minimal impact on ICC's financial 
resource composition because such currencies have been utilized rarely 
by Clearing Participants to meet IM and GF requirements. The Commission 
believes that, by removing JPY, GBP, and CAD as eligible forms of 
collateral that may be posted to ICC, ICC reduces the risk that ICC 
would not be able to meet its settlement or other liquidity obligations 
timely because of the need to convert one currency to another. The 
Commission therefore finds that the proposed revisions to the ICC Rules 
and Treasury Policy are designed to promote the prompt and accurate 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions for which ICC is responsible, consistent 
with Section 17A(b)(3)(F) of the Exchange Act. Similarly the proposed 
changes are designed to allow ICC to hold collateral in forms that 
minimize the risk of loss or delay in accessing them by reducing the 
need for ICC to conduct currency conversions. The Commission therefore 
finds that the proposed revisions also are consistent with the 
requirements of Rule 17Ad-22(d)(3).

IV. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-ICC-2017-010) be, and hereby is, 
approved.\7\
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    \7\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-17431 Filed 8-17-17; 8:45 am]
BILLING CODE 8011-01-P