Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Treasury Operations Policies and Procedures, 40813-40816 [2018-17627]

Download as PDF Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices from engaging in quoting activity that does not reach across the market, but that could result in a transaction that is a new high or low on the Exchange, but is not a new consolidated high or low price. The Exchange believes that the proposal is pro-competitive because revising which transactions would be prohibited would promote DMM quoting more aggressively in their assigned securities, thereby enhancing the ability of DMMs to meet their affirmative obligation under Rule 104. Similarly, shortening the time period restricting DMM trading, in addition to being more appropriate for the current high-speed trading environment, would provide DMMs with more time to engage in liquidating transactions before the prohibition begins, thereby enhancing DMM market making in the final minutes of trading. The Exchange further believes that its proposed rules governing DMMs would not impose any burden on competition that is not necessary or appropriate because the proposed rules are designed to foster a fair and orderly marketplace without diminishing the balance of benefits and obligations under Rule 104 or altering or diminishing the numerous obligations currently imposed by Rule 104 on DMMs. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action sradovich on DSK3GMQ082PROD with NOTICES Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: VerDate Sep<11>2014 17:15 Aug 15, 2018 Jkt 244001 Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2018–34 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2018–34. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE–2018–34 and should be submitted on or before September 6, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. [FR Doc. 2018–17630 Filed 8–15–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83819; File No. SR–ICC– 2018–009] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC’s Treasury Operations Policies and Procedures August 10, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,1 and Rule 19b–4,2 notice is hereby given that on July 31, 2018, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by ICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change, Security-Based Swap Submission, or Advance Notice The principal purpose of the proposed rule change is to revise the ICC Treasury Operations Policies and Procedures (‘‘Treasury Policy’’). These revisions do not require any changes to the ICC Clearing Rules (‘‘Rules’’). II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change, Security-Based Swap Submission, or Advance Notice In its filing with the Commission, ICC included statements concerning the purpose of and basis for the proposed rule change, security-based swap submission, or advance notice and discussed any comments it received on the proposed rule change, securitybased swap submission, or advance notice. The text of these statements may be examined at the places specified in Item IV below. ICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change, Security-Based Swap Submission, or Advance Notice (a) Purpose ICC proposes revisions to its Treasury Policy. ICC believes such revisions will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it 1 15 24 17 PO 00000 CFR 200.30–3(a)(12). Frm 00070 Fmt 4703 Sfmt 4703 40813 2 17 E:\FR\FM\16AUN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 16AUN1 sradovich on DSK3GMQ082PROD with NOTICES 40814 Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices is responsible. The proposed revisions are described in detail as follows. ICC proposes to update the ICC Treasury Policy in light of the exemptive order 3 (the ‘‘Order’’) that was issued by the Commodity Futures Trading Commission (‘‘CFTC’’) permitting ICC to invest, subject to certain conditions, Euro-denominated customer funds in French and German sovereign debt. ICC was prohibited from investing customer funds in foreign sovereign debt by CFTC Regulation 1.25,4 which does not permit such investments. As such, ICC is proposing changes to its Treasury Policy to permit its Treasury Department to directly invest both US Dollar- (‘‘USD’’) and Euro-denominated Guaranty Fund (‘‘GF’’) and margin cash posted by Clearing Participants (‘‘CPs’’) (‘‘house origin cash’’); to invest Eurodenominated cash posted by CPs for their margin requirements related to client positions (‘‘customer origin cash’’) in French and German sovereign debt; to revise its Euro investment guidelines to limit investment to French and German sovereign debt; and to make additional clarification and cleanup changes throughout the document to enhance readability. ICC proposes to revise the ‘Funds Management’ section. ICC proposes clarifying changes that move reference to its default position of holding USDdenominated house origin cash in its Federal Reserve Account from the ‘Investment Strategy’ subsection to the amended ‘ICC Investment of Guaranty Fund and Margin Cash’ subsection, which is separated into USD and Euro. ICC proposes clarifying language within the proposed ‘USD’ subsection to note that, if ICC is unable to deposit house origin cash in its Federal Reserve Account, ICC’s Treasury Department may hold or invest such USD cash as specified within the Treasury Policy. ICC also proposes a revision to correct a typographical error by adding the verb ‘‘has’’ to the phrase ‘‘ICE Clear Credit arrangements.’’ In the proposed ‘Euro’ subsection, ICC proposes to permit its Treasury Department to directly invest Eurodenominated house origin cash. Under the current ICC Treasury Policy, the ICC Treasury Department is only permitted to directly invest USD-denominated house origin cash. Specifically, ICC proposes to state that Euro-denominated house origin cash will be (i) held in bank deposits, (ii) allocated to outside investment managers, or (iii) directly held/invested by the ICC Treasury Department pursuant to the Euro investment guidelines in the appendix. Under the proposed changes, ICC’s Treasury Department is permitted to directly execute the Euro investment guidelines. In the ‘Outside Investment Management of Guaranty Fund and Margin Cash’ subsection, ICC proposes removing reference to a specific outside investment manager to reflect ICC’s engagement of multiple outside investment managers. ICC also proposes to correct certain typographical errors in this section to improve readability, including removing the indefinite article ‘‘an’’ in the phrase ‘‘an alternative or additional outside investment managers’’, adding the definite article ‘‘the’’ to the phrase ‘‘Investment Manager’s investment’’, and changing ‘‘Directory of Treasury’’ to ‘‘Director of Treasury’’ in a footnote. ICC proposes removing language from the ‘Treasury Management for Client Business’ section that references the introduction of client trades to clarify that ICC has already commenced client clearing. ICC proposes the new ‘Investment of Client Margin Cash’ subsection within the ‘Treasury Management for Client Business’ section, which specifically relates to ICC’s investment of customer origin cash. Currently, the ICC Treasury Policy prohibits ICC from investing customer origin cash in foreign sovereign debt due to CFTC Regulation 1.25,5 which does not permit such investments. In light of the CFTC’s Order,6 ICC proposes to state that it will invest customer origin cash in compliance with CFTC Regulation 1.25,7 including any applicable exemptive orders and including, without limitation, the conditions in CFTC Regulation 1.25 8 related to the investment of customer origin cash in non-U.S. sovereign debt. ICC proposes revisions to the Euro investment guidelines appendix. ICC proposes to include a footnote, for clarity, stating that its Treasury Department can directly execute the Euro investment guidelines. ICC also proposes to extend the Euro investment guidelines to ICC’s segregated CFTC Cleared Swaps Customer initial margin portfolio. ICC’s Euro investment guidelines provide for the investment of Euro cash in overnight reverse repurchase (‘‘repo’’) transactions with high quality sovereign debt as collateral. If 100% of the allocated cash cannot be 5 Id. 6 83 3 83 FR 35241 (July 25, 2018). 4 17 CFR 1.25. VerDate Sep<11>2014 17:15 Aug 15, 2018 7 17 FR 35241 (July 25, 2018). CFR 1.25. 8 Id. Jkt 244001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 placed in overnight reverse repo, backup investments will be in term reverse repo and then direct investment in high quality sovereign debt. Under the current Euro investment guidelines, investment in reverse repo and foreign sovereign debt is utilized only with respect to house origin cash and not customer origin cash pursuant to CFTC regulation. Given the CFTC’s Order 9 that allows ICC to invest Eurodenominated customer funds in French and German sovereign debt, ICC proposes to make its investment policies for Euro-denominated cash applicable to both customer origin and house origin cash. ICC further proposes to make the Euro investment guidelines uniform for both customer origin and house origin cash. Specifically, ICC proposes to revise the Euro investment guidelines to limit permissible investment, both directly and through reverse repo, to French and German sovereign debt given the comparability of French and German sovereign debt to U.S. government securities in terms of creditworthiness, liquidity, and volatility.10 With respect to customer origin cash, the proposed changes require that investments comply with any applicable conditions or restrictions set forth in CFTC Regulation 1.25 11 including any applicable exemptive orders and allow the use of term reverse repo subject to a certain restriction. Additionally, should conditions change so that the French or German sovereign debt no longer meets the conditions or restrictions of CFTC Regulation 1.25,12 the outside investment manager shall discontinue making any additional investments in such sovereign debt issuers. (b) Statutory Basis Section 17A(b)(3)(F) of the Act 13 requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions, and to the extent applicable, derivative agreements, contracts and transactions; to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible; and to comply with the 9 83 FR 35241 (July 25, 2018). ICE Clearing House Application for Exemptive Order (June 22, 2017) for a discussion of the suitability of French and German sovereign debt, available at https://www.cftc.gov/sites/ default/files/idc/groups/public/@requestsand actions/documents/ifdocs/icedcos4cappl6-2217.pdf. 11 17 CFR 1.25. 12 Id. 13 15 U.S.C. 78q–1(b)(3)(F). 10 See E:\FR\FM\16AUN1.SGM 16AUN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices provisions of the Act and the rules and regulations thereunder. ICC believes that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICC, in particular, to Section 17(A)(b)(3)(F),14 because ICC believes that the proposed rule changes will promote the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions, and contribute to the safeguarding of securities and funds associated with security-based swap transactions in ICC’s custody or control, or for which ICC is responsible. The proposed changes permitting ICC to invest Eurodenominated customer funds in French and German sovereign debt are designed to further ensure the reliable investment of assets in ICC’s control with minimal risk. Euro-denominated customer fund balances must be held in unsecured bank demand deposits accounts, exposing ICC and its CPs and their customers to the credit risk of such banks. ICC believes that the proposed changes, given the CFTC’s Order,15 to invest Euro-denominated customer funds in French and German sovereign debt would provide for an important alternative for the protection of customer funds. Moreover, allowing the Treasury Department to directly invest both USD and Euro-denominated house origin cash will continue to ensure the reliable investment of assets in ICC’s control with minimal risk by allowing the Treasury Department to directly execute the Euro investment guidelines, thereby facilitating ICC’s ability to promptly and accurately clear and settle its cleared CDS contracts and enhancing ICC’s ability to assure the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible. The clarification and clean-up changes that enhance readability will further ensure that the documentation of ICC’s Treasury Policy remains up-to-date, clear, and transparent. As such, the proposed rule changes are designed to promote the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions and to contribute to the safeguarding of securities and funds associated with security-based swap transactions in ICC’s custody or control, or for which ICC is responsible within the meaning of Section 17A(b)(3)(F) of the Act.16 In addition, the proposed revisions to the ICC Treasury Policy are consistent with the relevant requirements of Rule 17Ad–22.17 Rule 17Ad–22(b)(3) 18 requires ICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain sufficient financial resources to withstand, at a minimum, a default by the two CP families to which it has the largest exposures in extreme but plausible market conditions. The proposed changes to the Euro investment guidelines that limit investment to French and German sovereign debt and apply to both house origin and customer origin cash serve to preserve principle and maintain liquidity of funds as such debt has credit, liquidity, and volatility characteristics that are comparable to U.S. government securities, thereby ensuring that ICC continues to maintain sufficient financial resources to withstand, at a minimum, a default by the two CP families to which it has the largest exposures in extreme but plausible market conditions, consistent with the requirements of Rule 17Ad– 22(b)(3).19 Rule 17Ad–22(d)(3) 20 requires ICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to hold assets in a manner that minimizes risk of loss or of delay in its access to them and to invest assets in instruments with minimal credit, market, and liquidity risks. ICC believes that the proposed changes allowing ICC to invest Eurodenominated customer funds in French and German sovereign debt and allowing the Treasury Department to directly invest both USD and Eurodenominated house origin cash and directly execute the Euro investment guidelines will enhance ICC’s ability to hold assets in a manner that minimizes risk of loss or of delay in its access to them by serving as an important alternative for the protection of funds. Additionally, the proposed revisions to the Euro investment guidelines that limit investment to French and German sovereign debt for house origin cash allow ICC to continue to ensure to hold assets in a manner that minimizes risk of loss or of delay in its access to them and to invest assets in instruments with minimal credit, market, and liquidity risks given the comparability of French and German sovereign debt to U.S. government securities in terms of creditworthiness, liquidity, and 17 17 14 Id. 15 83 16 15 18 17 FR 35241 (July 25, 2018). U.S.C. 78q–1(b)(3)(F). VerDate Sep<11>2014 17:15 Aug 15, 2018 CFR 240.17Ad–22. CFR 240.17Ad–22(b)(3). volatility. Such changes are therefore reasonably designed to meet the requirements of Rule 17Ad–22(d)(3).21 (B) Clearing Agency’s Statement on Burden on Competition ICC does not believe the proposed rule changes would have any impact, or impose any burden, on competition. The proposed changes to ICC’s Treasury Policy will apply uniformly across all market participants. Therefore, ICC does not believe the proposed rule changes impose any burden on competition that is inappropriate in furtherance of the purposes of the Act. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change, Security-Based Swap Submission, or Advance Notice Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the Commission of any written comments received by ICC. III. Date of Effectiveness of the Proposed Rule Change, Security-Based Swap Submission, or Advance Notice and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, security-based swap submission, or advance notice is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ICC–2018–0 on the subject line. 19 Id. 20 17 Jkt 244001 PO 00000 CFR 240.17Ad–22(d)(3). Frm 00072 Fmt 4703 Sfmt 4703 40815 21 Id. E:\FR\FM\16AUN1.SGM 16AUN1 40816 Federal Register / Vol. 83, No. 159 / Thursday, August 16, 2018 / Notices Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR–ICC–2018–009. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change, security-based swap submission, or advance notice that are filed with the Commission, and all written communications relating to the proposed rule change, security-based swap submission, or advance notice between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of ICE Clear Credit and on ICE Clear Credit’s website at https:// www.theice.com/clear-credit/regulation. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ICC–2018–009 and should be submitted on or before September 6, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. sradovich on DSK3GMQ082PROD with NOTICES [FR Doc. 2018–17627 Filed 8–15–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83828; File No. SR– NYSEARCA–2018–58] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges To Introduce a New Pricing Tier August 10, 2018. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on August 1, 2018, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE Arca Equities Fees and Charges (‘‘Fee Schedule’’) to introduce a new pricing tier, Retail Order Step-Up Tier 2. The Exchange proposes to implement the fee change effective August 1, 2018. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 22 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:15 Aug 15, 2018 Jkt 244001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule, as described below, to introduce a new pricing tier, Retail Order Step-Up Tier 2, for securities with a per share price of $1.00 or above. The Exchange currently has a Retail Order Step-Up Tier pursuant to which ETP Holders, including Market Makers, that execute an ADV of Retail Orders 4 with a time-in-force designation of Day that add or remove liquidity during the month that is an increase of 0.12% or more of the U.S. CADV above their April 2018 ADV taken as a percentage of U.S. CADV receive a credit of $0.0033 per share when such orders provide liquidity to the book during the month in Tape A, Tape B and Tape C Securities. Retail Orders with a time-inforce designation of Day that remove liquidity from the Book are not charged a fee.5 To encourage even greater participation from ETP Holders and promote additional liquidity in Retail Orders, the Exchange proposes a new pricing tier—Retail Order Step-Up Tier 2.6 As proposed, a new Retail Order StepUp Tier 2 credit of $0.0035 per share for Retail Orders that provide displayed liquidity during the month in Tape A, Tape B and Tape C Securities would apply to ETP Holders, including Market Makers, that provide liquidity an average daily share volume per month of 1.10% or more of the U.S. CADV, and execute an ADV of Retail Orders with a time-in-force designation of Day that add or remove liquidity during the month that is an increase of 0.35% or more of the U.S. CADV above their April 2018 ADV taken as a percentage of U.S. CADV. Retail Orders with a time-in-force designation of Day that remove liquidity from the Book will not be charged a fee. Additionally, if an ETP Holder qualifies for the new Retail Order Step4 A Retail Order is an agency order that originates from a natural person and is submitted to the Exchange by an ETP Holder, provided that no change is made to the terms of the order to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. See Securities Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 3, 2012) (SR–NYSEArca–2012–77). 5 See Securities Exchange Act Release No. 83268 (May 17, 2018), 83 FR 23983 (May 23, 2017) (SR– NYSEArca–2018–34). 6 The Exchange proposes a non-substantive amendment to the Fee Schedule to rename the current Retail Order Step-Up Tier as ‘‘Retail Order Step-Up Tier 1.’’ E:\FR\FM\16AUN1.SGM 16AUN1

Agencies

[Federal Register Volume 83, Number 159 (Thursday, August 16, 2018)]
[Notices]
[Pages 40813-40816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17627]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83819; File No. SR-ICC-2018-009]


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

August 10, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on July 31, 
2018, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by ICC. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    The principal purpose of the proposed rule change is to revise the 
ICC Treasury Operations Policies and Procedures (``Treasury Policy''). 
These revisions do not require any changes to the ICC Clearing Rules 
(``Rules'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. The text of these statements may be 
examined at the places specified in Item IV below. ICC has prepared 
summaries, set forth in sections (A), (B), and (C) below, of the most 
significant aspects of these statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

(a) Purpose
    ICC proposes revisions to its Treasury Policy. ICC believes such 
revisions will facilitate the prompt and accurate clearance and 
settlement of securities transactions and derivative agreements, 
contracts, and transactions for which it

[[Page 40814]]

is responsible. The proposed revisions are described in detail as 
follows.
    ICC proposes to update the ICC Treasury Policy in light of the 
exemptive order \3\ (the ``Order'') that was issued by the Commodity 
Futures Trading Commission (``CFTC'') permitting ICC to invest, subject 
to certain conditions, Euro-denominated customer funds in French and 
German sovereign debt. ICC was prohibited from investing customer funds 
in foreign sovereign debt by CFTC Regulation 1.25,\4\ which does not 
permit such investments. As such, ICC is proposing changes to its 
Treasury Policy to permit its Treasury Department to directly invest 
both US Dollar- (``USD'') and Euro-denominated Guaranty Fund (``GF'') 
and margin cash posted by Clearing Participants (``CPs'') (``house 
origin cash''); to invest Euro-denominated cash posted by CPs for their 
margin requirements related to client positions (``customer origin 
cash'') in French and German sovereign debt; to revise its Euro 
investment guidelines to limit investment to French and German 
sovereign debt; and to make additional clarification and clean-up 
changes throughout the document to enhance readability.
---------------------------------------------------------------------------

    \3\ 83 FR 35241 (July 25, 2018).
    \4\ 17 CFR 1.25.
---------------------------------------------------------------------------

    ICC proposes to revise the `Funds Management' section. ICC proposes 
clarifying changes that move reference to its default position of 
holding USD-denominated house origin cash in its Federal Reserve 
Account from the `Investment Strategy' subsection to the amended `ICC 
Investment of Guaranty Fund and Margin Cash' subsection, which is 
separated into USD and Euro. ICC proposes clarifying language within 
the proposed `USD' subsection to note that, if ICC is unable to deposit 
house origin cash in its Federal Reserve Account, ICC's Treasury 
Department may hold or invest such USD cash as specified within the 
Treasury Policy. ICC also proposes a revision to correct a 
typographical error by adding the verb ``has'' to the phrase ``ICE 
Clear Credit arrangements.''
    In the proposed `Euro' subsection, ICC proposes to permit its 
Treasury Department to directly invest Euro-denominated house origin 
cash. Under the current ICC Treasury Policy, the ICC Treasury 
Department is only permitted to directly invest USD-denominated house 
origin cash. Specifically, ICC proposes to state that Euro-denominated 
house origin cash will be (i) held in bank deposits, (ii) allocated to 
outside investment managers, or (iii) directly held/invested by the ICC 
Treasury Department pursuant to the Euro investment guidelines in the 
appendix. Under the proposed changes, ICC's Treasury Department is 
permitted to directly execute the Euro investment guidelines.
    In the `Outside Investment Management of Guaranty Fund and Margin 
Cash' subsection, ICC proposes removing reference to a specific outside 
investment manager to reflect ICC's engagement of multiple outside 
investment managers. ICC also proposes to correct certain typographical 
errors in this section to improve readability, including removing the 
indefinite article ``an'' in the phrase ``an alternative or additional 
outside investment managers'', adding the definite article ``the'' to 
the phrase ``Investment Manager's investment'', and changing 
``Directory of Treasury'' to ``Director of Treasury'' in a footnote.
    ICC proposes removing language from the `Treasury Management for 
Client Business' section that references the introduction of client 
trades to clarify that ICC has already commenced client clearing.
    ICC proposes the new `Investment of Client Margin Cash' subsection 
within the `Treasury Management for Client Business' section, which 
specifically relates to ICC's investment of customer origin cash. 
Currently, the ICC Treasury Policy prohibits ICC from investing 
customer origin cash in foreign sovereign debt due to CFTC Regulation 
1.25,\5\ which does not permit such investments. In light of the CFTC's 
Order,\6\ ICC proposes to state that it will invest customer origin 
cash in compliance with CFTC Regulation 1.25,\7\ including any 
applicable exemptive orders and including, without limitation, the 
conditions in CFTC Regulation 1.25 \8\ related to the investment of 
customer origin cash in non-U.S. sovereign debt.
---------------------------------------------------------------------------

    \5\ Id.
    \6\ 83 FR 35241 (July 25, 2018).
    \7\ 17 CFR 1.25.
    \8\ Id.
---------------------------------------------------------------------------

    ICC proposes revisions to the Euro investment guidelines appendix. 
ICC proposes to include a footnote, for clarity, stating that its 
Treasury Department can directly execute the Euro investment 
guidelines. ICC also proposes to extend the Euro investment guidelines 
to ICC's segregated CFTC Cleared Swaps Customer initial margin 
portfolio. ICC's Euro investment guidelines provide for the investment 
of Euro cash in overnight reverse repurchase (``repo'') transactions 
with high quality sovereign debt as collateral. If 100% of the 
allocated cash cannot be placed in overnight reverse repo, backup 
investments will be in term reverse repo and then direct investment in 
high quality sovereign debt. Under the current Euro investment 
guidelines, investment in reverse repo and foreign sovereign debt is 
utilized only with respect to house origin cash and not customer origin 
cash pursuant to CFTC regulation. Given the CFTC's Order \9\ that 
allows ICC to invest Euro-denominated customer funds in French and 
German sovereign debt, ICC proposes to make its investment policies for 
Euro-denominated cash applicable to both customer origin and house 
origin cash. ICC further proposes to make the Euro investment 
guidelines uniform for both customer origin and house origin cash. 
Specifically, ICC proposes to revise the Euro investment guidelines to 
limit permissible investment, both directly and through reverse repo, 
to French and German sovereign debt given the comparability of French 
and German sovereign debt to U.S. government securities in terms of 
creditworthiness, liquidity, and volatility.\10\ With respect to 
customer origin cash, the proposed changes require that investments 
comply with any applicable conditions or restrictions set forth in CFTC 
Regulation 1.25 \11\ including any applicable exemptive orders and 
allow the use of term reverse repo subject to a certain restriction. 
Additionally, should conditions change so that the French or German 
sovereign debt no longer meets the conditions or restrictions of CFTC 
Regulation 1.25,\12\ the outside investment manager shall discontinue 
making any additional investments in such sovereign debt issuers.
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    \9\ 83 FR 35241 (July 25, 2018).
    \10\ See ICE Clearing House Application for Exemptive Order 
(June 22, 2017) for a discussion of the suitability of French and 
German sovereign debt, available at https://www.cftc.gov/sites/default/files/idc/groups/public/@requestsandactions/documents/ifdocs/icedcos4cappl6-22-17.pdf.
    \11\ 17 CFR 1.25.
    \12\ Id.
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(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \13\ requires, among other things, 
that the rules of a clearing agency be designed to promote the prompt 
and accurate clearance and settlement of securities transactions, and 
to the extent applicable, derivative agreements, contracts and 
transactions; to assure the safeguarding of securities and funds which 
are in the custody or control of the clearing agency or for which it is 
responsible; and to comply with the

[[Page 40815]]

provisions of the Act and the rules and regulations thereunder. ICC 
believes that the proposed rule changes are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to ICC, in particular, to Section 17(A)(b)(3)(F),\14\ 
because ICC believes that the proposed rule changes will promote the 
prompt and accurate clearance and settlement of securities 
transactions, derivatives agreements, contracts, and transactions, and 
contribute to the safeguarding of securities and funds associated with 
security-based swap transactions in ICC's custody or control, or for 
which ICC is responsible. The proposed changes permitting ICC to invest 
Euro-denominated customer funds in French and German sovereign debt are 
designed to further ensure the reliable investment of assets in ICC's 
control with minimal risk. Euro-denominated customer fund balances must 
be held in unsecured bank demand deposits accounts, exposing ICC and 
its CPs and their customers to the credit risk of such banks. ICC 
believes that the proposed changes, given the CFTC's Order,\15\ to 
invest Euro-denominated customer funds in French and German sovereign 
debt would provide for an important alternative for the protection of 
customer funds. Moreover, allowing the Treasury Department to directly 
invest both USD and Euro-denominated house origin cash will continue to 
ensure the reliable investment of assets in ICC's control with minimal 
risk by allowing the Treasury Department to directly execute the Euro 
investment guidelines, thereby facilitating ICC's ability to promptly 
and accurately clear and settle its cleared CDS contracts and enhancing 
ICC's ability to assure the safeguarding of securities and funds which 
are in the custody or control of ICC or for which it is responsible. 
The clarification and clean-up changes that enhance readability will 
further ensure that the documentation of ICC's Treasury Policy remains 
up-to-date, clear, and transparent. As such, the proposed rule changes 
are designed to promote the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions and to contribute to the safeguarding of 
securities and funds associated with security-based swap transactions 
in ICC's custody or control, or for which ICC is responsible within the 
meaning of Section 17A(b)(3)(F) of the Act.\16\
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ Id.
    \15\ 83 FR 35241 (July 25, 2018).
    \16\ 15 U.S.C. 78q-1(b)(3)(F).
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    In addition, the proposed revisions to the ICC Treasury Policy are 
consistent with the relevant requirements of Rule 17Ad-22.\17\ Rule 
17Ad-22(b)(3) \18\ requires ICC to establish, implement, maintain and 
enforce written policies and procedures reasonably designed to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the two CP families to which it has the largest exposures in extreme 
but plausible market conditions. The proposed changes to the Euro 
investment guidelines that limit investment to French and German 
sovereign debt and apply to both house origin and customer origin cash 
serve to preserve principle and maintain liquidity of funds as such 
debt has credit, liquidity, and volatility characteristics that are 
comparable to U.S. government securities, thereby ensuring that ICC 
continues to maintain sufficient financial resources to withstand, at a 
minimum, a default by the two CP families to which it has the largest 
exposures in extreme but plausible market conditions, consistent with 
the requirements of Rule 17Ad-22(b)(3).\19\
---------------------------------------------------------------------------

    \17\ 17 CFR 240.17Ad-22.
    \18\ 17 CFR 240.17Ad-22(b)(3).
    \19\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(3) \20\ requires ICC to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to hold assets in a manner that minimizes risk of loss or of 
delay in its access to them and to invest assets in instruments with 
minimal credit, market, and liquidity risks. ICC believes that the 
proposed changes allowing ICC to invest Euro-denominated customer funds 
in French and German sovereign debt and allowing the Treasury 
Department to directly invest both USD and Euro-denominated house 
origin cash and directly execute the Euro investment guidelines will 
enhance ICC's ability to hold assets in a manner that minimizes risk of 
loss or of delay in its access to them by serving as an important 
alternative for the protection of funds. Additionally, the proposed 
revisions to the Euro investment guidelines that limit investment to 
French and German sovereign debt for house origin cash allow ICC to 
continue to ensure to hold assets in a manner that minimizes risk of 
loss or of delay in its access to them and to invest assets in 
instruments with minimal credit, market, and liquidity risks given the 
comparability of French and German sovereign debt to U.S. government 
securities in terms of creditworthiness, liquidity, and volatility. 
Such changes are therefore reasonably designed to meet the requirements 
of Rule 17Ad-22(d)(3).\21\
---------------------------------------------------------------------------

    \20\ 17 CFR 240.17Ad-22(d)(3).
    \21\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed rule changes would have any 
impact, or impose any burden, on competition. The proposed changes to 
ICC's Treasury Policy will apply uniformly across all market 
participants. Therefore, ICC does not believe the proposed rule changes 
impose any burden on competition that is inappropriate in furtherance 
of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule 
Change, Security-Based Swap Submission, or Advance Notice Received From 
Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change, Security-Based 
Swap Submission, or Advance Notice and Timing for Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, security-based swap submission, or advance notice is consistent 
with the Act. Comments may be submitted by any of the following 
methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICC-2018-0 on the subject line.

[[Page 40816]]

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-ICC-2018-009. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change, security-based 
swap submission, or advance notice that are filed with the Commission, 
and all written communications relating to the proposed rule change, 
security-based swap submission, or advance notice between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of ICE Clear Credit and on ICE Clear Credit's website 
at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2018-009 and should be 
submitted on or before September 6, 2018.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Brent J. Fields,
Secretary.
[FR Doc. 2018-17627 Filed 8-15-18; 8:45 am]
 BILLING CODE 8011-01-P
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