Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to British Pounds Sterling as Client-Related Margin, 31571-31575 [2023-10472]
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Federal Register / Vol. 88, No. 95 / Wednesday, May 17, 2023 / Notices
8 would be applicable to all municipal
advisors. As such, the Commission finds
that the proposed rule change would
help ensure that all regulated entities
dually registered (as a dealer and as a
municipal advisor, or as an investment
adviser with the SEC and as a municipal
advisor), are subject to consistent
standards on the use of testimonials in
advertisements. The Commission finds
that the proposed amendments to Rules
G–40 and G–8 would therefore promote
efficiency in the marketplace. Therefore,
the Commission concludes that the
amendments to Rule G–40 and Rule G–
8 would not negatively affect
competition and capital formation.
VI. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Exchange Act,169
that the proposed rule change (SR–
MSRB–2023–01) be, and hereby is,
approved.
For the Commission, by the Office of
Municipal Securities, pursuant to delegated
authority.170
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10468 Filed 5–16–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97489; File No. SR–ICC–
2023–003]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to
British Pounds Sterling as ClientRelated Margin
May 11, 2023.
ddrumheller on DSK120RN23PROD with NOTICES1
I. Introduction
On March 13, 2023, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(2) of the Securities Exchange Act
of 1934 (the ‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
accept British Pounds Sterling in
satisfaction of client-related margin
requirements. The proposed rule change
was published for comment in the
Federal Register on March 30, 2023.3
The Commission did not receive
comments regarding the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
II. Description of the Proposed Rule
Change
A. Background
ICC is registered with the Commission
as a clearing agency for the purpose of
clearing CDS contracts. ICC requires that
its Clearing Participants post margin to
collateralize their credit exposure to
ICC, based on the size and risk of their
cleared positions. On a daily basis, ICC
determines margin requirements (i) for a
Clearing Participant’s own cleared
positions (referred to as ‘‘house’’
positions) and (ii) for the cleared
positions of its clients.
The proposed rule change relates to
the second category, margin
requirements for the cleared positions of
clients. Specifically, the proposed rule
change would allow Clearing
Participants to use cash British pounds
sterling (‘‘GBP’’) to satisfy client-related
margin requirements. Currently, a
Clearing Participant may meet clientrelated margin requirements with US
dollars, Euros, or US Treasuries. ICC
previously accepted GBP in satisfaction
of client-related margin requirements,
but it revoked that option in 2017.4 ICC
did so because no Clearing Participants
posted GBP at that time, and ICC
considered GBP a less liquid resource
due to the potential need to convert it
to either US dollars or Euros.
ICC has decided to once again accept
GBP in satisfaction of client-related
margin requirements. ICC is doing so in
response to feedback from customers.
Several UK and EU market participants
have asked ICC for the ability to post
GBP in addition to the asset types
currently accepted by ICC.
In addition to satisfying the request of
these customers, ICC believes that
accepting GBP would overall better
serve other UK and EU-based market
participants. Such participants may be
seeking an alternative CDS clearing
service, given that ICE Clear Europe is
intending to close its UK-based CDS
clearing service in October of this year.5
To carry out this change, ICC would
amend the ICE Clear Credit Rulebook
(‘‘ICC Rules’’) and the ICE Clear Credit
Treasury Operations Policies &
Procedures (‘‘Treasury Policy’’), as
described in detail below.6
B. ICC Rules
Currently, Schedule 401 of the ICC
Rules sets out the collateral that ICC
accepts to satisfy client-related margin
requirements. Schedule 401 describes
this collateral in terms of the CDS
contract for which the margin is
required. Specifically, Schedule 401
categorizes the collateral as that which
ICC accepts for client-related US-dollar
denominated products and clientrelated Euro denominated products.7
For each of those products, Schedule
401 requires that a Clearing Participant
meet a certain percentage of the relevant
margin requirement in particular
collateral. Below is what Schedule 401
currently provides for client-related
margin.
Client-Related Initial Margin Liquidity
Requirements
Client-Related US Dollar Denominated
Product Requirement
Asset Type
Minimum Percentage of Requirement
US Dollar Denominated Assets
(US Cash and/or US Treasuries)
65%
All Eligible Collateral
(US Cash, Euro Cash, and/or US Treasuries)
+35% (for a total of 100%)
169 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Self-Regulatory Organizations; ICE Clear Credit
LLC; Notice of Filing of Proposed Rule Change
Relating to British Pounds Sterling as Client-Related
Margin; Exchange Act Release No. 97196 (March 24,
2023), 88 FR 19183 (March 30, 2023) (File No. SR–
ICC–2023–003) (‘‘Notice’’).
170 17
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4 See Securities Exchange Act Release No. 81037
(June 28, 2017), 82 FR 31121 (July 5, 2017) (SR–
ICC–2017–010) (notice). The Commission
subsequently approved ICC’s proposal to remove
the eligibility of GBP cash (as well as certain other
currencies) as acceptable collateral. See Securities
Exchange Act Release No. 81386 (Aug. 14, 2017),
82 FR 39484 (Aug. 18, 2017) (SR–ICC–2017–010).
5 See Circular C22/109 Cessation of clearing of
CDS Contracts: Postponement of Withdrawal Date,
PO 00000
Frm 00094
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31571
available at https://www.ice.com/publicdocs/clear_
europe/circulars/C22109.pdf.
6 Capitalized terms not otherwise defined herein
have the meanings provided to them in the Rules
or Treasury Policy, as applicable.
7 Currently, ICC only clears US-dollar
denominated and Euro denominated products, and
the proposed rule change would not alter this.
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Federal Register / Vol. 88, No. 95 / Wednesday, May 17, 2023 / Notices
Client-Related Euro Denominated
Product Requirement
Asset Type
Minimum Percentage of Requirement
All Eligible Collateral
(US Cash, Euro Cash, and/or US Treasuries)
100%
The proposed rule change would
update Schedule 401 by adding GBP to
the list of ‘‘all eligible collateral.’’ In
addition, ICC would modify the clientrelated margin requirements set forth in
Schedule 401 of the ICC Rules as
follows. For US dollar denominated
products, ICC would change (i) the
percentage of the requirement that must
be met in US dollars and US Treasuries
from 65% to 45% and (ii) the percentage
that may be met in any eligible
collateral (US dollars, Euros, GBP, and
US Treasuries) from 35% to 55%. For
Euro denominated products, ICC would
change (i) the minimum percentage of
the requirement that must be met in US
dollars, Euros, or US Treasuries from
100% to 45% and (ii) add a new
category that permits the remaining
55% of the requirement to be met in any
eligible collateral (US dollars, Euros,
GBP, and US Treasuries).
of US dollars/Euro/Treasuries for a
client-related margin requirement
relating to a US-dollar denominated
product than it does currently (100%
versus 45%). Because ICC does not treat
any collateral posted for clients as a
liquidity resource available in the event
of a default, the Commission does not
believe that the changes in percentages
or acceptance of GBP will affect ICC’s
liquidity resources.8 Moreover, as ICC
explained, the proposed modified
thresholds reflect the fact that only the
first-day liquidity needs (measured as
45% of requirements) must be met in a
form of collateral for which ICC
maintains committed repurchase
agreements and committed FX
facilities.9 The remaining 55% can be
met with any type of accepted collateral.
The Commission therefore believes that
with the proposed modified thresholds,
8 As explained in its Liquidity Risk Management
Framework, ICC only uses client margin deposits in
case of a client default, and when ICC conducts
stress testing of its liquidity resources, it assumes
that no client margin deposits are available.
9 Notice, 88 FR at 19184.
Client-Related Initial Margin Liquidity
Requirements (as Amended)
Client-Related US Dollar Denominated
Product Requirement
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EN17MY23.001
Thus, ICC would amend Schedule 401
of the ICC Rules to add GBP as Eligible
Collateral for client-related margin
requirements and modify the
percentages for both US-dollar
denominated products and Euro
denominated products. With respect to
these changes in particular, the
Commission notes that ICC would
accept a smaller percentage of US
dollars for a client-related margin
requirement relating to a US-dollar
denominated product than it does
currently (65% versus 45%). Similarly,
ICC would accept a smaller percentage
EN17MY23.000
ddrumheller on DSK120RN23PROD with NOTICES1
Client-Related Euro Denominated
Product Requirement
Federal Register / Vol. 88, No. 95 / Wednesday, May 17, 2023 / Notices
ICC continues to maintain a
conservative approach by directly
requiring that client-related first-day
liquidity needs (i.e., 45% of Initial
Margin requirements) are met in the
forms of permitted collateral for which
either collateral transformations are not
necessary, or committed agreements are
in place to provide all necessary
immediate liquidity.
C. Treasury Policy
The overall purpose of the ICC
Treasury Policy is to articulate the
policies and procedures used by the ICC
Treasury Department. ICC’s Treasury
manages ICC’s cash and collateral,
including the assets that Clearing
Participants transfer to ICC to satisfy
client-related margin requirements. The
Treasury Policy therefore would apply
to GBP provided by Clearing
Participants to satisfy client-related
margin requirements. Accordingly, ICC
would modify the Treasury Policy to
incorporate GBP, as discussed below.
ddrumheller on DSK120RN23PROD with NOTICES1
i. Section III, Funds Management
ICC first would modify Section III of
the Policy, which concerns ICC’s funds
management. Section III explains the
types of funds in which ICC’s Treasury
invests cash and collateral and ICC’s
overall strategy with respect to such
investments. For example, with respect
to Euros posted by Clearing Participants,
Section III currently provides that
Treasury may, among other things, hold
such cash in bank deposits or allocate
it to outside investment managers. The
proposed rule change would add to
Section III a similar explanation of ICC’s
strategy with respect to cash posted by
Clearing Participants in GBP that is
Client Margin. With respect to those
funds, ICC would not invest such GBP
but would instead hold it in bank
deposits.
ii. Section IV, Cash Management
ICC next would update Section IV of
the Policy, which explains how ICC
moves and transfers cash in the conduct
of its business. Section IV, among other
things, describes how ICC monitors the
daily collection of margin to ensure the
timely receipt of payment for
settlement, including the deadlines for
the collection of margin and for the
withdrawal or substitution of collateral.
Currently, ICC requires that Clearing
Participants notify it of withdrawals or
substitutions involving Euros by 9:00
a.m. ET. The proposed rule change
would not alter this deadline, but it
would add GBP to the existing 9:00 a.m.
ET deadline. Thus, under the proposed
rule change, Clearing Participants
would be required to notify ICC of
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18:34 May 16, 2023
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withdrawals or substitutions involving
Euro cash and GBP collateral by 9:00
a.m. ET.
iii. Section V, Collateral Valuation
ICC also would update Section V of
the Policy, which explains the type of
assets that ICC accepts as collateral and
how ICC custodies Clearing
Participants’ collateral. With respect to
the assets that ICC accepts as collateral,
Section V of the Policy explains that
Clearing Participants are generally
required to post assets as collateral that
meet ICC’s standards for acceptable
collateral. Section V also lists the assets
that ICC considers to be acceptable
collateral. Currently, as discussed
above, ICC accepts US dollars, Euros,
and US Treasuries. The proposed rule
change would add GBP to this list, with
the caveat that ICC accepts it as
collateral for client positions only (as
opposed to Clearing Participants’ house
positions).
With respect to the assets that ICC
accepts as collateral, ICC prices those
assets to determine their value (and
therefore how much of the margin
requirement those assets satisfy). ICC
also discounts the value of the collateral
to account for market risks and currency
risks (a process known as haircutting).
Section V describes ICC’s process for
valuing each of the types of collateral
that it accepts. The proposed rule
change would update this valuation
process to include GBP. The process for
valuing GBP would be as follows.
ICC would first convert the value of
the GBP to an amount in US dollars. ICC
would then reduce this US-dollar value
using the currency haircut it has
established for GBP. ICC would then
apply this reduced value to determine
how much of the margin requirement
the GBP collateral satisfies.
If the GBP is being used to satisfy a
margin requirement for a Eurodenominated product, ICC would take
one additional step. Margin
requirements for Euro-denominated
products are expressed in Euros. Thus,
to determine how much of this margin
requirement the GBP collateral satisfies,
ICC would convert the Euro margin
requirement to a US-dollar value. This
is needed because, as discussed above,
ICC would convert the value of the GBP
collateral to US dollars. In converting
the Euro margin requirement to a USdollar value, ICC would increase the
value by the currency haircut it has
established for Euro. ICC would take
this additional step because, as a
default, ICC’s treasury system would
have already haircut the Euro value in
converting it to US dollars. Thus,
increasing the value by the haircut
PO 00000
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Fmt 4703
Sfmt 4703
31573
ensures that, when determining how
much of the margin requirement the
GBP collateral satisfies, ICC is
considering the full amount of the
margin requirement (rather than only
the amount post-haircut).
iv. Section VI, Treasury Management for
Client Business
Finally, the proposed rule change
would update Section VI of the Policy.
Section VI specifically describes how
ICC manages margin requirements
associated with client trades. Among
other things, Section VI describes the
types of collateral that ICC accepts to
satisfy a client-related margin
requirement. Currently, Section VI lists
US dollars, Euros, and US government
securities as collateral eligible for client
margin, and explains that these assets
are in line with the current eligible
collateral for house-related margin
requirements. The proposed rule change
would add GBP to this list, and also
would delete the explanation that these
assets are in line with the current
eligible collateral for House margin.
This particular explanation would no
longer be correct, given that ICC would
accept GBP for client-related margin
requirements but not for house-related
margin requirements.
Section VI of the Policy also explains
the percentages of these assets that a
Clearing Participant can use to satisfy a
particular client-related margin
requirement. This information mirrors
Schedule 401 of ICC’s rules, discussed
above. Thus, the proposed rule change
would amend this description to match
the revisions to Schedule 401 described
above. For a client-related margin
requirement relating to a US-dollar
denominated product, a Clearing
Participant would be required to meet
(i) 45% of the requirement with US
dollars and/or US Treasuries and (ii) the
remaining 55% with US dollars, Euros,
US Treasuries, and/or GBP. For a clientrelated margin requirement relating to a
Euro denominated product, a Clearing
Participant would be required to meet
(i) 45% of the requirement with US
dollars, Euros, and/or US Treasuries and
(ii) the remaining 55% with US dollars,
Euros, US Treasuries, and/or GBP.
With respect to these changes in
particular, the Commission notes that
ICC would accept a smaller percentage
of US dollars/Treasuries for a clientrelated margin requirement relating to a
US-dollar denominated product than it
does currently (65% versus 45%).
Similarly, ICC would accept a smaller
percentage of US dollars/Euros/
Treasuries for a client-related margin
requirement relating to a Euro
denominated product than it does
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Federal Register / Vol. 88, No. 95 / Wednesday, May 17, 2023 / Notices
currently (100% versus 45%). Because
ICC does not treat any collateral posted
for clients as a liquidity resource
available in the event of a default, the
Commission does not believe that the
changes in percentages or acceptance of
GBP will affect ICC’s liquidity
resources.10 Moreover, as discussed
above, the Commission believes that
with the proposed modified thresholds,
ICC would continue to maintain a
conservative approach by directly
requiring that client-related first-day
liquidity needs (i.e., 45% of Initial
Margin requirements) are met in the
forms of permitted collateral for which
either collateral transformations are not
necessary, or committed agreements are
in place to provide all necessary
immediate liquidity.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.11 For
the reasons discussed below, the
Commission finds that the proposed
rule change is consistent with section
17A(b)(3)(F) 12 of the Act and Rule
17Ad–22(e)(5) 13 thereunder.
ddrumheller on DSK120RN23PROD with NOTICES1
A. Consistency With Section
17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, among other things, that the
rules of ICC be designed to promote the
prompt and accurate clearance and
settlement of securities transactions.14
Based on its review of the record, and
for the reasons discussed below, the
Commission believes the proposed
changes to ICC’s Rules and the Treasury
Policy are consistent with the
promotion of the prompt and accurate
clearance and settlement of securities
transactions.
As discussed above, the proposed
revisions to the ICC Rules and Treasury
Policy would allow Clearing
Participants to post GBP to satisfy
client-related margin requirements. The
Commission believes that these changes,
by expanding the collateral that clients
could provide to Clearing Participants to
10 As
explained in its Liquidity Risk Management
Framework, ICC only uses client margin deposits in
case of a client default, and when ICC conducts
stress testing of its liquidity resources, it assumes
that no client margin deposits are available.
11 15 U.S.C. 78s(b)(2)(C).
12 15 U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17Ad–22(e)(5).
14 15 U.S.C. 78q–1(b)(3)(F).
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18:34 May 16, 2023
Jkt 259001
satisfy margin requirements, would
encourage clients to clear their positions
at ICC. The Commission believes this
could be especially true for clients that
are based in the UK or otherwise have
reserves of GBP. Thus, the Commission
believes this aspect of the proposed rule
change would promote the prompt and
accurate clearance and settlement of
securities transactions among clients.
Moreover, as noted above, ICC
requires that Clearing Participants
satisfy a certain percentage of a clientrelated margin requirement in US
dollars and/or Euros, as applicable. The
proposed rule change would lower the
minimum percentage that a Clearing
Participant must meet in US dollars
and/or Euros. The proposed rule change
also would allow Clearing Participants
to use GBP to satisfy the non-US dollar/
Euros portion. Again, the Commission
believes these changes would encourage
clients to clear transactions at ICC,
especially those who may have reserves
of GBP. The Commission further
believes that doing so would not
materially affect ICC’s available
liquidity resources in case of a default
because, consistent with its current
practice, ICC would not treat the GBP
posted to satisfy a client’s margin
requirement as a liquidity resource
available in the event of a default. As
discussed above, ICC only uses client
margin deposits in case of a client
default, and when ICC conducts stress
testing of its liquidity resources, it
assumes that no client margin deposits
are available. Moreover, as discussed
above, ICC would continue to maintain
a conservative approach by directly
requiring that client-related first-day
liquidity needs (i.e., 45% of Initial
Margin requirements) are met in the
forms of permitted collateral for which
either collateral transformations are not
necessary, or committed agreements are
in place to provide all necessary
immediate liquidity.
The Commission therefore finds that
the proposed revisions to the ICC Rules
and Treasury Policy are designed to
promote the prompt and accurate
settlement of securities transactions,
derivatives agreements, contracts, and
transactions for which ICC is
responsible, consistent with section
17A(b)(3)(F) of the Exchange Act.15
B. Consistency With Rule 17Ad–22(e)(5)
Under the Act
Rule 17Ad–22(e)(5) requires that ICC,
among other things, establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to limit the assets
15 15
PO 00000
U.S.C. 78q–1(b)(3)(F).
Frm 00097
Fmt 4703
Sfmt 4703
it accepts as collateral to those with low
credit, liquidity, and market risks, and
set and enforce appropriately
conservative haircuts and concentration
limits.16 As discussed above, the
proposed rule change would allow
Clearing Participants to use GBP to
satisfy client-related margin
requirements. The proposed rule change
also would lower the minimum
percentage of a client-related margin
requirement that a Clearing Participant
must meet in US dollars and/or Euros.
The proposed rule change would not
alter ICC’s current collateral haircuts or
concentration limits. Indeed, as
discussed above, ICC would convert the
GBP posted as collateral to a US dollar
value and then reduce the US dollar
value using the GBP currency haircut.
Moreover, consistent with its current
practice, ICC would not treat the GBP
posted to satisfy a client’s margin
requirement as a liquidity resource
available in the event of a Clearing
Participant’s default. ICC only uses
client margin deposits in case of a client
default, and when ICC conducts stress
testing of its liquidity resources, it
assumes that no client margin deposits
are available.
For these reasons, the Commission
believes that ICC would continue to
limit the assets it accepts as collateral to
those with low credit, liquidity, and
market risks, and set and enforce
appropriately conservative haircuts and
concentration limits while accepting
GBP as collateral, consistent with Rule
17Ad–22(e)(5).17
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with section 17A(b)(3)(F) 18
of the Act and Rule 17Ad–22(e)(5) 19
thereunder.
It is therefore ordered pursuant to
section 19(b)(2) of the Act 20 that the
proposed rule change (SR–ICC–2023–
003), be, and hereby is, approved.21
16 17
CFR 240.17Ad–22(e)(5).
CFR 240.17Ad–22(e)(5).
18 15 U.S.C. 78q–1(b)(3)(F).
19 17 CFR 240.17Ad–22(e)(5).
20 15 U.S.C. 78s(b)(2).
21 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
17 17
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Federal Register / Vol. 88, No. 95 / Wednesday, May 17, 2023 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–10472 Filed 5–16–23; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #17852 and #17853;
CALIFORNIA Disaster Number CA–00380]
Presidential Declaration Amendment of
a Major Disaster for Public Assistance
Only for the State of California
Small Business Administration.
Amendment 3.
AGENCY:
ACTION:
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #17842 and #17843;
CALIFORNIA Disaster Number CA–00376]
Presidential Declaration Amendment of
a Major Disaster for the State of
California
Small Business Administration.
Amendment 3.
AGENCY:
ACTION:
This is an amendment of the
Presidential declaration of a major
disaster for the State of California
(FEMA–4699–DR), dated 04/03/2023.
Incident: Severe Winter Storms,
Straight-line Winds, Flooding,
Landslides, and Mudslides.
Incident Period: 02/21/2023 and
continuing.
SUMMARY:
Issued on 05/11/2023.
Physical Loan Application Deadline
Date: 06/05/2023.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/03/2024.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Recovery &
Resilience, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: The notice
of the President’s major disaster
declaration for the State of California,
dated 04/03/2023, is hereby amended to
extend the deadline for filing
applications for physical damages as a
result of this disaster to 06/05/2023.
All other information in the original
declaration remains unchanged.
ddrumheller on DSK120RN23PROD with NOTICES1
DATES:
(Catalog of Federal Domestic Assistance
Number 59008)
Francisco Sa´nchez, Jr.,
Associate Administrator, Office of Disaster
Recovery & Resilience.
[FR Doc. 2023–10458 Filed 5–16–23; 8:45 am]
BILLING CODE 8026–09–P
This is an amendment of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of California (FEMA–4699–
DR), dated 04/03/2023.
Incident: Severe Winter Storms,
Straight-line Winds, Flooding,
Landslides, and Mudslides.
Incident Period: 02/21/2023 and
continuing.
DATES: Issued on 05/11/2023.
Physical Loan Application Deadline
Date: 06/05/2023.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/03/2024.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Recovery &
Resilience, U.S. Small Business
Administration, 409 3rd Street SW,
Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: The notice
of the President’s major disaster
declaration for Private Non-Profit
organizations in the State of California,
dated 04/03/2023, is hereby amended to
extend the deadline for filing
applications for physical damage as a
result of this disaster to 06/05/2023.
All other information in the original
declaration remains unchanged.
SUMMARY:
(Catalog of Federal Domestic Assistance
Number 59008)
Francisco Sa´nchez, Jr.,
Associate Administrator, Office of Disaster
Recovery & Resilience.
[FR Doc. 2023–10459 Filed 5–16–23; 8:45 am]
BILLING CODE 8026–09–P
DEPARTMENT OF STATE
[Public Notice: 12013]
Privacy Act of 1974; System of
Records
Department of State.
Notice of a modified system of
AGENCY:
ACTION:
records.
Clearance Records system is used by the
Bureau of Information Resource
Management in the Department of State
to determine an employee’s eligibility
for cryptographic clearance and to
protect cryptographic duties and
sensitive information from unauthorized
disclosure.
DATES: In accordance with 5 U.S.C.
552a(e)(4) and (11), this system of
records notice is effective upon
publication, with the exception of the
routine uses (a) and (b) that are subject
to a 30-day period during which
interested persons may submit
comments to the Department. Please
submit any comments by June 16, 2023.
ADDRESSES: Questions can be submitted
by mail, email, or by calling Eric F.
Stein, the Senior Agency Official for
Privacy on (202) 485–2051. If mail,
please write to: U.S Department of State;
Office of Global Information Systems,
A/GIS; Room 4534, 2201 C St. NW,
Washington, DC 20520. If email, please
address the email to the Senior Agency
Official for Privacy, Eric F. Stein, at
Privacy@state.gov. Please write
‘‘Cryptographic Clearance Records,
State-07’’ on the envelope or the subject
line of your email.
FOR FURTHER INFORMATION CONTACT: Eric
F. Stein, Senior Agency Official for
Privacy; U.S. Department of State; Office
of Global Information Services, A/GIS;
Room 4534, 2201 C St. NW,
Washington, DC 20520 or by calling
(202) 485–2051.
SUPPLEMENTARY INFORMATION: The
purpose of this modification is to make
substantive and administrative changes
to the previously published notice. This
notice modifies the following sections:
Summary, Dates, Addresses, For Further
Information Contact, Supplementary
Information, System Location(s),
Categories of Records in the System,
Policies and Procedures for Retrieval of
Records, Routine Uses of Records
Maintained in the System, Policies and
Practices for Storage of Records, Policies
and Practices for Retention and Disposal
of Records, and Administrative,
Technical, and Physical Safeguards. In
addition, this notice makes
administrative updates to the following
sections: Record Access Procedures,
Notification Procedures, and History.
This notice is being modified to reflect
new OMB guidance, new routine uses
and categories of records, updated
contact information, and a notice
publication history.
SYSTEM NAME AND NUMBER:
The information collected and
Cryptographic Clearance Records,
maintained in the Cryptographic
State-07.
SUMMARY:
22 17
CFR 200.30–3(a)(12).
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Agencies
[Federal Register Volume 88, Number 95 (Wednesday, May 17, 2023)]
[Notices]
[Pages 31571-31575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10472]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97489; File No. SR-ICC-2023-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to British Pounds Sterling as
Client-Related Margin
May 11, 2023.
I. Introduction
On March 13, 2023, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to accept
British Pounds Sterling in satisfaction of client-related margin
requirements. The proposed rule change was published for comment in the
Federal Register on March 30, 2023.\3\ The Commission did not receive
comments regarding the proposed rule change. For the reasons discussed
below, the Commission is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Filing of Proposed Rule Change Relating to British Pounds
Sterling as Client-Related Margin; Exchange Act Release No. 97196
(March 24, 2023), 88 FR 19183 (March 30, 2023) (File No. SR-ICC-
2023-003) (``Notice'').
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II. Description of the Proposed Rule Change
A. Background
ICC is registered with the Commission as a clearing agency for the
purpose of clearing CDS contracts. ICC requires that its Clearing
Participants post margin to collateralize their credit exposure to ICC,
based on the size and risk of their cleared positions. On a daily
basis, ICC determines margin requirements (i) for a Clearing
Participant's own cleared positions (referred to as ``house''
positions) and (ii) for the cleared positions of its clients.
The proposed rule change relates to the second category, margin
requirements for the cleared positions of clients. Specifically, the
proposed rule change would allow Clearing Participants to use cash
British pounds sterling (``GBP'') to satisfy client-related margin
requirements. Currently, a Clearing Participant may meet client-related
margin requirements with US dollars, Euros, or US Treasuries. ICC
previously accepted GBP in satisfaction of client-related margin
requirements, but it revoked that option in 2017.\4\ ICC did so because
no Clearing Participants posted GBP at that time, and ICC considered
GBP a less liquid resource due to the potential need to convert it to
either US dollars or Euros.
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\4\ See Securities Exchange Act Release No. 81037 (June 28,
2017), 82 FR 31121 (July 5, 2017) (SR-ICC-2017-010) (notice). The
Commission subsequently approved ICC's proposal to remove the
eligibility of GBP cash (as well as certain other currencies) as
acceptable collateral. See Securities Exchange Act Release No. 81386
(Aug. 14, 2017), 82 FR 39484 (Aug. 18, 2017) (SR-ICC-2017-010).
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ICC has decided to once again accept GBP in satisfaction of client-
related margin requirements. ICC is doing so in response to feedback
from customers. Several UK and EU market participants have asked ICC
for the ability to post GBP in addition to the asset types currently
accepted by ICC.
In addition to satisfying the request of these customers, ICC
believes that accepting GBP would overall better serve other UK and EU-
based market participants. Such participants may be seeking an
alternative CDS clearing service, given that ICE Clear Europe is
intending to close its UK-based CDS clearing service in October of this
year.\5\
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\5\ See Circular C22/109 Cessation of clearing of CDS Contracts:
Postponement of Withdrawal Date, available at https://www.ice.com/publicdocs/clear_europe/circulars/C22109.pdf.
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To carry out this change, ICC would amend the ICE Clear Credit
Rulebook (``ICC Rules'') and the ICE Clear Credit Treasury Operations
Policies & Procedures (``Treasury Policy''), as described in detail
below.\6\
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\6\ Capitalized terms not otherwise defined herein have the
meanings provided to them in the Rules or Treasury Policy, as
applicable.
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B. ICC Rules
Currently, Schedule 401 of the ICC Rules sets out the collateral
that ICC accepts to satisfy client-related margin requirements.
Schedule 401 describes this collateral in terms of the CDS contract for
which the margin is required. Specifically, Schedule 401 categorizes
the collateral as that which ICC accepts for client-related US-dollar
denominated products and client-related Euro denominated products.\7\
For each of those products, Schedule 401 requires that a Clearing
Participant meet a certain percentage of the relevant margin
requirement in particular collateral. Below is what Schedule 401
currently provides for client-related margin.
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\7\ Currently, ICC only clears US-dollar denominated and Euro
denominated products, and the proposed rule change would not alter
this.
---------------------------------------------------------------------------
Client-Related Initial Margin Liquidity Requirements
Client-Related US Dollar Denominated Product Requirement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Asset Type Minimum Percentage of Requirement
--------------------------------------------------------------------------------------------------------------------------------------------------------
US Dollar Denominated Assets 65%
(US Cash and/or US Treasuries)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Eligible Collateral +35% (for a total of 100%)
(US Cash, Euro Cash, and/or US Treasuries)
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 31572]]
Client-Related Euro Denominated Product Requirement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Asset Type Minimum Percentage of Requirement
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Eligible Collateral 100%
(US Cash, Euro Cash, and/or US Treasuries)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The proposed rule change would update Schedule 401 by adding GBP to
the list of ``all eligible collateral.'' In addition, ICC would modify
the client-related margin requirements set forth in Schedule 401 of the
ICC Rules as follows. For US dollar denominated products, ICC would
change (i) the percentage of the requirement that must be met in US
dollars and US Treasuries from 65% to 45% and (ii) the percentage that
may be met in any eligible collateral (US dollars, Euros, GBP, and US
Treasuries) from 35% to 55%. For Euro denominated products, ICC would
change (i) the minimum percentage of the requirement that must be met
in US dollars, Euros, or US Treasuries from 100% to 45% and (ii) add a
new category that permits the remaining 55% of the requirement to be
met in any eligible collateral (US dollars, Euros, GBP, and US
Treasuries).
Client-Related Initial Margin Liquidity Requirements (as Amended)
Client-Related US Dollar Denominated Product Requirement
[GRAPHIC] [TIFF OMITTED] TN17MY23.000
Client-Related Euro Denominated Product Requirement
[GRAPHIC] [TIFF OMITTED] TN17MY23.001
Thus, ICC would amend Schedule 401 of the ICC Rules to add GBP as
Eligible Collateral for client-related margin requirements and modify
the percentages for both US-dollar denominated products and Euro
denominated products. With respect to these changes in particular, the
Commission notes that ICC would accept a smaller percentage of US
dollars for a client-related margin requirement relating to a US-dollar
denominated product than it does currently (65% versus 45%). Similarly,
ICC would accept a smaller percentage of US dollars/Euro/Treasuries for
a client-related margin requirement relating to a US-dollar denominated
product than it does currently (100% versus 45%). Because ICC does not
treat any collateral posted for clients as a liquidity resource
available in the event of a default, the Commission does not believe
that the changes in percentages or acceptance of GBP will affect ICC's
liquidity resources.\8\ Moreover, as ICC explained, the proposed
modified thresholds reflect the fact that only the first-day liquidity
needs (measured as 45% of requirements) must be met in a form of
collateral for which ICC maintains committed repurchase agreements and
committed FX facilities.\9\ The remaining 55% can be met with any type
of accepted collateral. The Commission therefore believes that with the
proposed modified thresholds,
[[Page 31573]]
ICC continues to maintain a conservative approach by directly requiring
that client-related first-day liquidity needs (i.e., 45% of Initial
Margin requirements) are met in the forms of permitted collateral for
which either collateral transformations are not necessary, or committed
agreements are in place to provide all necessary immediate liquidity.
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\8\ As explained in its Liquidity Risk Management Framework, ICC
only uses client margin deposits in case of a client default, and
when ICC conducts stress testing of its liquidity resources, it
assumes that no client margin deposits are available.
\9\ Notice, 88 FR at 19184.
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C. Treasury Policy
The overall purpose of the ICC Treasury Policy is to articulate the
policies and procedures used by the ICC Treasury Department. ICC's
Treasury manages ICC's cash and collateral, including the assets that
Clearing Participants transfer to ICC to satisfy client-related margin
requirements. The Treasury Policy therefore would apply to GBP provided
by Clearing Participants to satisfy client-related margin requirements.
Accordingly, ICC would modify the Treasury Policy to incorporate GBP,
as discussed below.
i. Section III, Funds Management
ICC first would modify Section III of the Policy, which concerns
ICC's funds management. Section III explains the types of funds in
which ICC's Treasury invests cash and collateral and ICC's overall
strategy with respect to such investments. For example, with respect to
Euros posted by Clearing Participants, Section III currently provides
that Treasury may, among other things, hold such cash in bank deposits
or allocate it to outside investment managers. The proposed rule change
would add to Section III a similar explanation of ICC's strategy with
respect to cash posted by Clearing Participants in GBP that is Client
Margin. With respect to those funds, ICC would not invest such GBP but
would instead hold it in bank deposits.
ii. Section IV, Cash Management
ICC next would update Section IV of the Policy, which explains how
ICC moves and transfers cash in the conduct of its business. Section
IV, among other things, describes how ICC monitors the daily collection
of margin to ensure the timely receipt of payment for settlement,
including the deadlines for the collection of margin and for the
withdrawal or substitution of collateral. Currently, ICC requires that
Clearing Participants notify it of withdrawals or substitutions
involving Euros by 9:00 a.m. ET. The proposed rule change would not
alter this deadline, but it would add GBP to the existing 9:00 a.m. ET
deadline. Thus, under the proposed rule change, Clearing Participants
would be required to notify ICC of withdrawals or substitutions
involving Euro cash and GBP collateral by 9:00 a.m. ET.
iii. Section V, Collateral Valuation
ICC also would update Section V of the Policy, which explains the
type of assets that ICC accepts as collateral and how ICC custodies
Clearing Participants' collateral. With respect to the assets that ICC
accepts as collateral, Section V of the Policy explains that Clearing
Participants are generally required to post assets as collateral that
meet ICC's standards for acceptable collateral. Section V also lists
the assets that ICC considers to be acceptable collateral. Currently,
as discussed above, ICC accepts US dollars, Euros, and US Treasuries.
The proposed rule change would add GBP to this list, with the caveat
that ICC accepts it as collateral for client positions only (as opposed
to Clearing Participants' house positions).
With respect to the assets that ICC accepts as collateral, ICC
prices those assets to determine their value (and therefore how much of
the margin requirement those assets satisfy). ICC also discounts the
value of the collateral to account for market risks and currency risks
(a process known as haircutting). Section V describes ICC's process for
valuing each of the types of collateral that it accepts. The proposed
rule change would update this valuation process to include GBP. The
process for valuing GBP would be as follows.
ICC would first convert the value of the GBP to an amount in US
dollars. ICC would then reduce this US-dollar value using the currency
haircut it has established for GBP. ICC would then apply this reduced
value to determine how much of the margin requirement the GBP
collateral satisfies.
If the GBP is being used to satisfy a margin requirement for a
Euro-denominated product, ICC would take one additional step. Margin
requirements for Euro-denominated products are expressed in Euros.
Thus, to determine how much of this margin requirement the GBP
collateral satisfies, ICC would convert the Euro margin requirement to
a US-dollar value. This is needed because, as discussed above, ICC
would convert the value of the GBP collateral to US dollars. In
converting the Euro margin requirement to a US-dollar value, ICC would
increase the value by the currency haircut it has established for Euro.
ICC would take this additional step because, as a default, ICC's
treasury system would have already haircut the Euro value in converting
it to US dollars. Thus, increasing the value by the haircut ensures
that, when determining how much of the margin requirement the GBP
collateral satisfies, ICC is considering the full amount of the margin
requirement (rather than only the amount post-haircut).
iv. Section VI, Treasury Management for Client Business
Finally, the proposed rule change would update Section VI of the
Policy. Section VI specifically describes how ICC manages margin
requirements associated with client trades. Among other things, Section
VI describes the types of collateral that ICC accepts to satisfy a
client-related margin requirement. Currently, Section VI lists US
dollars, Euros, and US government securities as collateral eligible for
client margin, and explains that these assets are in line with the
current eligible collateral for house-related margin requirements. The
proposed rule change would add GBP to this list, and also would delete
the explanation that these assets are in line with the current eligible
collateral for House margin. This particular explanation would no
longer be correct, given that ICC would accept GBP for client-related
margin requirements but not for house-related margin requirements.
Section VI of the Policy also explains the percentages of these
assets that a Clearing Participant can use to satisfy a particular
client-related margin requirement. This information mirrors Schedule
401 of ICC's rules, discussed above. Thus, the proposed rule change
would amend this description to match the revisions to Schedule 401
described above. For a client-related margin requirement relating to a
US-dollar denominated product, a Clearing Participant would be required
to meet (i) 45% of the requirement with US dollars and/or US Treasuries
and (ii) the remaining 55% with US dollars, Euros, US Treasuries, and/
or GBP. For a client-related margin requirement relating to a Euro
denominated product, a Clearing Participant would be required to meet
(i) 45% of the requirement with US dollars, Euros, and/or US Treasuries
and (ii) the remaining 55% with US dollars, Euros, US Treasuries, and/
or GBP.
With respect to these changes in particular, the Commission notes
that ICC would accept a smaller percentage of US dollars/Treasuries for
a client-related margin requirement relating to a US-dollar denominated
product than it does currently (65% versus 45%). Similarly, ICC would
accept a smaller percentage of US dollars/Euros/Treasuries for a
client-related margin requirement relating to a Euro denominated
product than it does
[[Page 31574]]
currently (100% versus 45%). Because ICC does not treat any collateral
posted for clients as a liquidity resource available in the event of a
default, the Commission does not believe that the changes in
percentages or acceptance of GBP will affect ICC's liquidity
resources.\10\ Moreover, as discussed above, the Commission believes
that with the proposed modified thresholds, ICC would continue to
maintain a conservative approach by directly requiring that client-
related first-day liquidity needs (i.e., 45% of Initial Margin
requirements) are met in the forms of permitted collateral for which
either collateral transformations are not necessary, or committed
agreements are in place to provide all necessary immediate liquidity.
---------------------------------------------------------------------------
\10\ As explained in its Liquidity Risk Management Framework,
ICC only uses client margin deposits in case of a client default,
and when ICC conducts stress testing of its liquidity resources, it
assumes that no client margin deposits are available.
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III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\11\ For the reasons discussed below, the Commission finds
that the proposed rule change is consistent with section 17A(b)(3)(F)
\12\ of the Act and Rule 17Ad-22(e)(5) \13\ thereunder.
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\11\ 15 U.S.C. 78s(b)(2)(C).
\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17Ad-22(e)(5).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed to promote the prompt and accurate
clearance and settlement of securities transactions.\14\ Based on its
review of the record, and for the reasons discussed below, the
Commission believes the proposed changes to ICC's Rules and the
Treasury Policy are consistent with the promotion of the prompt and
accurate clearance and settlement of securities transactions.
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\14\ 15 U.S.C. 78q-1(b)(3)(F).
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As discussed above, the proposed revisions to the ICC Rules and
Treasury Policy would allow Clearing Participants to post GBP to
satisfy client-related margin requirements. The Commission believes
that these changes, by expanding the collateral that clients could
provide to Clearing Participants to satisfy margin requirements, would
encourage clients to clear their positions at ICC. The Commission
believes this could be especially true for clients that are based in
the UK or otherwise have reserves of GBP. Thus, the Commission believes
this aspect of the proposed rule change would promote the prompt and
accurate clearance and settlement of securities transactions among
clients.
Moreover, as noted above, ICC requires that Clearing Participants
satisfy a certain percentage of a client-related margin requirement in
US dollars and/or Euros, as applicable. The proposed rule change would
lower the minimum percentage that a Clearing Participant must meet in
US dollars and/or Euros. The proposed rule change also would allow
Clearing Participants to use GBP to satisfy the non-US dollar/Euros
portion. Again, the Commission believes these changes would encourage
clients to clear transactions at ICC, especially those who may have
reserves of GBP. The Commission further believes that doing so would
not materially affect ICC's available liquidity resources in case of a
default because, consistent with its current practice, ICC would not
treat the GBP posted to satisfy a client's margin requirement as a
liquidity resource available in the event of a default. As discussed
above, ICC only uses client margin deposits in case of a client
default, and when ICC conducts stress testing of its liquidity
resources, it assumes that no client margin deposits are available.
Moreover, as discussed above, ICC would continue to maintain a
conservative approach by directly requiring that client-related first-
day liquidity needs (i.e., 45% of Initial Margin requirements) are met
in the forms of permitted collateral for which either collateral
transformations are not necessary, or committed agreements are in place
to provide all necessary immediate liquidity.
The Commission therefore finds that the proposed revisions to the
ICC Rules and Treasury Policy are designed to promote the prompt and
accurate settlement of securities transactions, derivatives agreements,
contracts, and transactions for which ICC is responsible, consistent
with section 17A(b)(3)(F) of the Exchange Act.\15\
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(5) Under the Act
Rule 17Ad-22(e)(5) requires that ICC, among other things,
establish, implement, maintain and enforce written policies and
procedures reasonably designed to limit the assets it accepts as
collateral to those with low credit, liquidity, and market risks, and
set and enforce appropriately conservative haircuts and concentration
limits.\16\ As discussed above, the proposed rule change would allow
Clearing Participants to use GBP to satisfy client-related margin
requirements. The proposed rule change also would lower the minimum
percentage of a client-related margin requirement that a Clearing
Participant must meet in US dollars and/or Euros. The proposed rule
change would not alter ICC's current collateral haircuts or
concentration limits. Indeed, as discussed above, ICC would convert the
GBP posted as collateral to a US dollar value and then reduce the US
dollar value using the GBP currency haircut.
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\16\ 17 CFR 240.17Ad-22(e)(5).
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Moreover, consistent with its current practice, ICC would not treat
the GBP posted to satisfy a client's margin requirement as a liquidity
resource available in the event of a Clearing Participant's default.
ICC only uses client margin deposits in case of a client default, and
when ICC conducts stress testing of its liquidity resources, it assumes
that no client margin deposits are available.
For these reasons, the Commission believes that ICC would continue
to limit the assets it accepts as collateral to those with low credit,
liquidity, and market risks, and set and enforce appropriately
conservative haircuts and concentration limits while accepting GBP as
collateral, consistent with Rule 17Ad-22(e)(5).\17\
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\17\ 17 CFR 240.17Ad-22(e)(5).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with section 17A(b)(3)(F) \18\ of the Act and Rule
17Ad-22(e)(5) \19\ thereunder.
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(5).
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It is therefore ordered pursuant to section 19(b)(2) of the Act
\20\ that the proposed rule change (SR-ICC-2023-003), be, and hereby
is, approved.\21\
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\20\ 15 U.S.C. 78s(b)(2).
\21\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
[[Page 31575]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10472 Filed 5-16-23; 8:45 am]
BILLING CODE 8011-01-P