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, 10647-10652 [E9-5242]
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Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices
(‘‘PWG’’) noted in November 2008 that
its:
Board decisions and notices are
available on our Web site at https://
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.
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:
FOR FURTHER INFORMATION CONTACT:
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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
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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
1 See ‘‘PWG Announces Initiatives to Strengthen
OTC Derivatives Oversight and Infrastructure.’’ U.S.
Department of the Treasury press release issued
November 14, 2008. Available at: https://
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.
2 Securities 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
https://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.
3 The 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.
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10647
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
5 See 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 https://www.treasurydirect.gov/instit/
statreg/gsareg/gsareg.htm.
6 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.
7 For 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.
8 ECPs 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.
9 As 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.
10 For 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.
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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.
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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
11 A financial institution is defined in 15 U.S.C.
78c(a)(46).
12 Public Law 99–571, 100 Stat. 3208 (1986).
13 The 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.
14 A 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).
15 A 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
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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
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.
17 The 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.
18 The 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.)
19 See note 2, supra. The SEC’s exemptive order
applies only to CDS that are not swap agreements
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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
and thus not excluded from the definition of
‘‘security’’ by Section 3A of the Exchange Act.
20 15 U.S.C. 78mm(b).
21 See note 13, supra.
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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
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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
22 Novation 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.
23 See note 5, supra.
24 The 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
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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
press release, available at https://
www.federalreserve.gov/newsevents/press/orders/
20090304a.htm.
25 The request states that the participant criteria
are specified in the ICE Trust Rules.
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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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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
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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
26 The 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.
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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
27 Treasury 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.
28 For 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).
29 See note 10, supra.
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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
30 See
31 15
note 2, supra.
U.S.C. 78o–5(b)(4) and (5).
VerDate Nov<24>2008
17:01 Mar 10, 2009
Jkt 217001
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
32 The 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.
33 Part 402 does not apply to registered brokerdealers that are subject to Rule 15c3–1.
34 See note 10, supra.
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Frm 00124
Fmt 4703
Sfmt 4703
10651
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 https://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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Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices
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
rwilkins on PROD1PC63 with NOTICES
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
35 See
36 See
note 8, supra.
note 10, supra.
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17:01 Mar 10, 2009
Jkt 217001
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 https://
www.fincen.gov/forms/files/
fin105_cmir.pdf.
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Frm 00125
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Sfmt 4703
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.
SUPPLEMENTARY INFORMATION:
E:\FR\FM\11MRN1.SGM
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Agencies
[Federal Register Volume 74, Number 46 (Wednesday, March 11, 2009)]
[Notices]
[Pages 10647-10652]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-5242]
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\1\ See ``PWG Announces Initiatives to Strengthen OTC
Derivatives Oversight and Infrastructure.'' U.S. Department of the
Treasury press release issued November 14, 2008. Available at:
https://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.
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.
---------------------------------------------------------------------------
\2\ Securities 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 https://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 Gramm-Leach-Bliley Act.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\3\ The 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.
\5\ See 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 https://www.treasurydirect.gov/instit/statreg/gsareg/
gsareg.htm.
---------------------------------------------------------------------------
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
[[Page 10648]]
to Section 15C(a)(1) of the Exchange Act.
---------------------------------------------------------------------------
\6\ 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.
\7\ For 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.
\8\ ECPs 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.
\9\ As 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.
\10\ For 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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\11\ A financial institution is defined in 15 U.S.C. 78c(a)(46).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\12\ Public Law 99-571, 100 Stat. 3208 (1986).
\13\ The 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.
\14\ A 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).
\15\ A 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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
\17\ The 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.
\18\ The 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.)
---------------------------------------------------------------------------
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\
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\19\ See 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).
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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.''
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\21\ See note 13, supra.
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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
[[Page 10649]]
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.
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\22\ Novation 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.
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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
prudently-managed 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\
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\23\ See note 5, supra.
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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.
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\24\ The 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 https://www.federalreserve.gov/newsevents/
press/orders/20090304a.htm.
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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).
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\25\ The request states that the participant criteria are
specified in the ICE Trust Rules.
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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
[[Page 10650]]
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\
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\26\ The approach of the SEC exemptive order was to apply
substantially the same framework to CDS transactions that applies to
transactions in security-based 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
security-based 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.
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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\
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\27\ Treasury 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.
\28\ For 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).
\29\ See note 10, supra.
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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
[[Page 10651]]
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\
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\30\ See note 2, supra.
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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\
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\31\ 15 U.S.C. 78o-5(b)(4) and (5).
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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\
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\32\ The 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.
\33\ Part 402 does not apply to registered broker-dealers that
are subject to Rule 15c3-1.
\34\ See note 10, supra.
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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 https://
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
[[Page 10652]]
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\
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\35\ See note 8, supra.
\36\ See note 10, supra.
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(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