Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Treasury Operations Policies and Procedures, 73734-73739 [2024-20460]
Download as PDF
<![CDATA[
73734
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
Contract 297 to Competitive Product
List and Notice of Filing Materials
Under Seal; Filing Acceptance Date:
September 4, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Arif Hafiz; Comments
Due: September 12, 2024.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2024–20436 Filed 9–10–24; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100935; File No. SR–ICC–
2024–005]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to
ICC’s Treasury Operations Policies
and Procedures
September 5, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934,1 15
U.S.C. 78s(b)(1) and Rule 19b–4,2 notice
is hereby given that on August 22, 2024,
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 primarily prepared by ICC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
lotter on DSK11XQN23PROD with NOTICES1
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
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 (the ‘‘Rules’’).
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
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
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
17:42 Sep 10, 2024
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
Media Inquiries
Gail Adams
gail.adams@prc.gov
1 15
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.
ICE Clear Credit is proposing to
amend its Treasury Policy. The purpose
of the Treasury Policy is to articulate the
policies and procedures used to support
the ICC Treasury Department (the
‘‘Treasury Department’’), which is
responsible for daily cash and collateral
management of margin and guaranty
fund assets. The purpose of the
proposed changes is to make various
updates and clarifications, including to
further explain the goals and the
responsibilities of the ICC Treasury
Department in performing treasury
functions for cleared contracts, as well
as safeguarding securities and funds in
custody. The amendments also clarify
the timing of the return of a
withdrawing Clearing Participant’s
(‘‘CP’’) guaranty fund (‘‘GF’’) deposit to
be consistent with the Rules, as
discussed herein. The amendments
would clarify the ICC investment policy
with respect to ICC’s own operating
capital to provide greater flexibility to
make direct investments, as discussed
below, and update various references to
SWIFT messaging so as not to become
outdated. Various non-substantive
drafting changes and improvements
would also be made throughout the
Treasury Policy, such as updating the
use of defined terms, correcting
typographical errors and similar
changes. The amendments do not
represent a change in ICC’s practices
relating to treasury management, but
rather are intended to improve and
clarify the documentation and
descriptions of such practices.
ICC proposes to update the treasury
department section of the Treasury
Policy.3 The amendments would update
the statement of the overall
responsibilities of ICC, aided by the
Treasury Department, to specifically
reference facilitating the prompt and
accurate clearing and settlement of
securities transactions and derivatives,
and safeguarding securities and funds in
ICC’s custody or control for which it is
responsible. Additionally, the
3 Treasury Policy Section ‘‘II. The Treasury
Department.’’
Jkt 262001
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
amendments would remove the
reference to the ICC Risk Management
Framework when developing
investment and collateral management
strategies. The amendments would
clarify certain references and terms
throughout this section, such as
referencing the ‘‘General Guaranty
Fund’’ as defined in ICC Rule 102, as
well as referencing cash and non-cash
collateral (which was previously
phrased as ‘‘cash and collateral’’ or
‘‘cash or collateral’’) throughout the
Treasury Policy. With respect to the
Treasury Departments responsibilities to
manage Guaranty Fund requirements
and ‘‘posting’’ by Clearing Participants,
the amendments would change the
reference from ‘‘posting’’ to ‘‘collateral
postings’’ to provide a clearer and more
accurate description of Treasury’s
responsibilities. Certain references to
margin accounts, margin payments and
margin requirements or processes (and
words of similar effect) will be revised
to refer more generally to accounts,
payments and related clearing or
processes requirements (or
requirements), in order to more broadly
reference overall payment requirements
from the clearing process (which
include but are not limited to margin).
The amendments would highlight that
ICE Clear Credit, rather than ICE Clear
Credit’s Risk Department, generates
daily requirements for all Clearing
Participants (including requirements for
indirect participants i.e., Client-Related
requirements) because such
requirements are generated
automatically by ICE Clear Credit’s
clearing systems as opposed being
generated specifically by ICE Clear
Credit’s Risk Department. Further, the
amendments note that such daily
requirements are based on the Clearing
Participants’ cleared ‘‘positions’’ rather
than their cleared ‘‘trades’’ as positions
is a more accurate description of a
Clearing Participants cleared activity at
ICE Clear Credit. The amendments also
clarify the Treasury Departments
responsibility in ensuring that payments
are received from Clearing Participants
by removing an incorrect reference to
ensuring that payments are honored by
Clearing Participants’ banking
relationships. Under ICC’s existing
direct settlement model, as discussed
below, Clearing Participants are
responsible to ensure that ICC timely
receives all required payments;
completion of settlement is not based on
whether a Clearing Participant’s bank
honors a payment direction. Similarly,
references to settlement issues have
been generalized to reference treasury
management related issues, and
E:\FR\FM\11SEN1.SGM
11SEN1
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
references to substitution of collateral
for cash have been replaced by the more
general description of performing
collateral substitutions. These changes
do not reflect a substantive change in
practice, but rather are intended to
provide a more comprehensive overall
description of relevant payment
practices. In the statement of the
Treasury Departments role in
developing of investment and collateral
management strategies, the amendments
would remove an outdated reference to
such activities being done within the
ICC Risk Management Framework, as
the relevant investment and collateral
management policies are now set out in
the Treasury Policy rather than in the
framework. The amendment would also
generalize a reference to cash
management to the broader term
collateral management to more fully
describe the scope of this activity and
for consistency throughout the Treasury
Policy. The amendments also clarify the
organizational structure of the Treasury
Department function, as overseen by the
ICC Treasury Director who reports to the
ICC Chief Operating Officer (‘‘COO’’)
(and clarifies that the ICC Treasury
Department is not and has never been a
part of the operations department).
ICC also proposes to update the funds
management section of the Treasury
Policy.4 The amendments would add
conforming references to
‘‘requirements’’ in certain places for
consistency in referring to margin and
Guaranty Fund requirements. In
addition, the amendments would clarify
or add various defined terms relating to
margin, including a defined term for
‘‘Margin’’ covering both initial and
mark-to-market margin. A definitional
footnote relating to the Guaranty Fund
would be removed as unnecessary in
light of prior references to that term in
the Treasury Policy. Additionally, the
amendments would clarify that the
funds would include both cash and noncash collateral. For completeness and
consistency with the existing Rules and
other procedures of ICC, the
amendments would state that ICC
maintains and manages ‘‘House Margin’’
and ‘‘Client Margin’’ separately. The
amendments also clarify that required
initial margin and GF contributions are
held in a manner that minimizes the
risk of loss or delay in access, consistent
with regulatory requirements (which
reflects the standard under applicable
regulations), rather than referring only
to highly liquid and short-term
investments. Under Section III.B.,
Investment Strategy, various conforming
4 Treasury Policy Section ‘‘III. Funds
Management.’’
VerDate Sep<11>2014
17:42 Sep 10, 2024
Jkt 262001
and non-substantive drafting changes
would be made, including to the use of
appropriate defined terms and
consistent references to cash collateral
(instead of cash). References in the
existing Treasury Policy to certain
investments to be made by the Director
of Treasury would be revised to simply
refer to the Treasury Department as a
whole, reflecting actual practice that
investments are made by Treasury
Department personnel subject to the
supervision of the Director of Treasury.
In the discussion of investment of US
dollar cash, additional clarifying
language would be added to this section
such as describing the role of the
Federal Reserve Bank of Chicago
(‘‘FRB’’) as a depository and noting that
US dollar cash may be invested in US
Treasury/Agency reverse repurchase
agreements rather than just Treasury/
Agency reverse repurchase agreements.
The amendments would also reflect that
ICC currently maintains multiple
accounts (rather than a single account)
at the FRB, as discussed below. For
reverse repo transactions, the
amendments would also remove an
unnecessary description of certain
settlement arrangements and
unnecessary statements regarding steps
ICC would take to ensure replacement
securities are eligible and valued
correctly when a substitution of
securities becomes necessary (as ICC
does not believe such matters are
relevant to the level of detail of the
description contained in the Treasury
Policy). The amendments would revise
the description of the calculation of the
minimum cash required to be invested
in bilateral reverse repos to reflect 45%
of the top two Clearing Participants’
Margin requirements (taking into
account specifically both initial and
mark-to-market margin requirements, as
opposed to referencing the generalized
phrase ‘‘risk margin’’), as ICC believes
that this is the more detailed and
accurate description of ICC’s current
practices. Additionally, the
amendments would acknowledge that
bilateral reverse repo transactions may
be settled through alternative
counterparties that may be added in the
future to account for the possibility that
ICE Clear Credit’s financial service
provider relationships may change in
the future. The amendments would also
clarify that ICC in practice uses more
than one outside investment manager to
facilitate its investment of Guaranty
Fund and margin cash.
ICC also proposes revisions to the
Tables of collateral liquidity
requirements contained in Section III of
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
73735
the Treasury Policy 5 to update various
defined terms and references (both in
the text of the Tables and the titles of
the Tables) to be consistent with the
other amendments being made to the
Treasury Policy, such as to use the
defined term Margin and to conform the
terminology for the currencies and
collateral (US Dollar Cash, EUR Cash,
and US Treasury Securities). An
amendment will also change a reference
from ‘‘assets’’ to ‘‘collateral’’, to more
precisely describe the collateral being
described. A statement relating to
additional margin that may be called
where a clearing participant does not
meet the required liquidity
requirements has been clarified to refer
more precisely to initial margin. In
addition, ICC proposes revising the
participant withdrawals’ sub-section of
Section III of the Treasury Policy 6 to
reflect that the requirements described
are based on the ICC Rules and to add
a statement that Guaranty Fund deposits
will not be returned until after all
positions of the withdrawing participant
have been closed out and all liabilities
of the participant to ICC have been
satisfied, in order to be consistent with
the requirements of existing Rule 807.
The amendments would also remove a
statement that if a participant provides
notice of withdrawal less than 60 days
from the end of the calendar quarter, its
withdrawal will not be effective until
the end of the following quarter, as this
requirement is not set forth in the Rules.
The discussion of ICC’s use of
committed repo facilities would clarify
that any expenses (including but not
limited to interest expenses) incurred
through such facilities following a
Clearing Participant default will be
attributed to the account of that CP,
consistent with the general approach for
allocation of close-out costs to a
defaulter under the Rules.
ICC proposes revising the cash
settlement section of the Treasury
Policy.7 Under the cash settlement
section, the examples of types of
transaction payments have been
expanded to include options premia and
interest on Mark-to-Market Margin,
reflecting current practice. The
amendments would also add further
5 Table 1 Collateral Liquidation Assumptions (US
Dollar denominated requirements); Table 2
Collateral Liquidation Assumptions (Euro
denominated requirements); Table 3 House Initial
Margin & Guaranty Fund Liquidity Requirements
(Non-Client US Dollar denominated requirements);
and Table 4 House Initial Margin & Guaranty Fund
Liquidity Requirements (Non-Client Euro
denominated requirements) (collectively, the
‘‘Tables’’).
6 Treasury Policy Section III, Sub-Section ‘‘D.
Participants’ Withdrawal.’’
7 Treasury Policy Section ‘‘IV. Cash Settlement.’’
E:\FR\FM\11SEN1.SGM
11SEN1
lotter on DSK11XQN23PROD with NOTICES1
73736
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
explanation of the existing ICC direct
settlement model used to manage cash
movements, for consistency and to
provide greater clarity as to settlement
operations. As described, the direct
settlement requires the Clearing
Participants to establish settlement bank
arrangements and make requested
payments to ICC in the required
timeframe. ICC maintains direct debit
authority over the settlement bank
accounts of Clearing Participants.
In addition, the amendments to
Section IV would add to the current
criteria for ICE Clear Credit’s settlement
banks (which include requirements as to
regulation and supervision, capital
requirements for non-US institution,
absence of majority sovereign
ownership, internal ICC credit
requirements and operational
capability) a requirement that the bank
provide specific liquidity information,
in order to facilitate management by ICC
of liquidity risk from settlement
arrangements. This would include
providing information as to the bank’s
liquidity coverage ratio, and if that is
not reported by the bank, ICC would use
other criteria (e.g., requesting a
description of the bank’s liquidity risk
management policy and/or requesting
the liquidity coverage ratio of the bank’s
affiliated reporting entity within the
bank’s group) based on ICC’s discretion,
to assess the liquidity risks arising from
settlement banks. In addition, as
revised, the Treasury Policy would no
longer specify particular backup
settlement banks for ICC but reference a
general requirement for ICC to maintain
appropriate backup relationships. ICC
believes this approach is preferable and
avoids the need to amend the Treasury
Policy if backup arrangements change.
The amendments would add further
description of the daily settlement
process (including as to cases where no
net settlement is owed and bank
holidays), as set forth below. Consistent
with the added description of the direct
settlement model as noted above, the
amendments would state the
responsibility of Clearing Participants to
ensure that ICC timely receives all
requested payments and note that
failure to make timely payments may be
a default. This proposed change
provides greater clarity as to ICC’s
current practices. In the discussion of
routine settlement procedures, an
erroneous reference to contacting an
agent bank in the event of a late
payment would be removed (as the
Clearing Participant would be contacted
directly). The amendments would also
add statements describing the daily
settlement process as being conducted
every business day and regarding the
VerDate Sep<11>2014
17:42 Sep 10, 2024
Jkt 262001
timing of settlement finality under the
direct settlement model. Consistent with
current practice, settlement would be
deemed final and irrevocable at the
earlier of the time when ICC received
the relevant payment, or a financial
institution used by ICC sends a
confirmation message that payment has
been made. As noted above, the
amendments would also remove
references to various specific types of
SWIFT messages (in light of the
possibility that specific SWIFT message
types may be modified, renamed or
changed from time to time by SWIFT),
and describe such messages more
generally. In the case of non-routine
settlement, the amendments would
remove an unnecessary reference to a
specific SWIFT settlement instruction,
since ICC and the Clearing Participant
in question would be expected to
separately confirm the particulars of the
settlement.
In the discussion of a SWIFT outage,
the amendments would clarify that the
relevant scenario arises where ICC is
unable to send SWIFT messages to the
Clearing Participants’ settlement banks
(correcting an erroneous reference to
ICC’s direct settlement banks). The
amendments would revise certain
procedures for communicating directly
with CP’s in the event of a SWIFT
outage (removing an incorrect reference
to communicating with ICC’s direct
settlement banks as above). The
amendments would also address
correcting or re-issuing a SWIFT
message in the event of a non-payment
for certain technical reasons and remove
certain references to specific types of
SWIFT messages or reports that ICC
believes are unnecessary, and such
specific message types may be modified,
renamed or changed from time to time
(as noted above). The amendment
would also remove a requirement that
certain emails be password protected (as
ICC does not believe email security
measures need to be set out in the
Treasury Policy). With respect to the
discussion of bank-to-bank messages,
the amendments would remove
references to specific settlement banks
and instead refer to the applicable ICC
settlement bank generally (to avoid the
need to amend the Treasury Policy in
the event of any change in settlement
banks). With respect to the scenario
where a bank rejects a SWIFT debt
message because of a technical defect,
the amendments will remove a specific
requirement to manually update the
transaction summary report and
manually initiate a specific reversal or
correction message and add instead a
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
general obligation to correct the prior
message or reissue a corrected message.
ICC proposes revisions to settlement
bank failure sub-section of Section IV of
the Treasury Policy.8 In the event that
a settlement bank fails to perform, ICE
Clear Credit would instruct the CP to
wire the funds to the ICE Clear Credit
accounts at an alternate settlement bank.
The amendments broaden the list of
such alternate settlement banks that
may be designated by ICC.
In the discussion of ICC’s use of the
FRB Accounts for depository purposes,
the amendments would update the
Treasury Policy to reflect that ICC
currently maintains separate FRB
Accounts for house and client margin in
light of applicable segregation
requirements (removing and updating
certain outdated language that
contemplated a scenario where ICC
might only have one FRB account).
Other amendments in this section make
non-substantive changes to the use of
defined terms (including new terms
House Account and Client Account as
well as replacing FRB customer cash
account and FRB House cash account
with FRB House Account and replacing
FRB Client cash account with FRB
Client Account). Certain conforming
changes would also be made to
consistently refer to Guaranty Fund and
House Accounts in this section.
Further, ICC proposes revisions to the
custodial assets section of the Treasury
Policy.9 The amendments would
reference ongoing monitoring according
to ICE Clear Credit’s Counterparty
Monitoring Procedures (rather than
identifying only a specific annual report
that is no longer required to be
submitted as ICC Counterparty
Monitoring Procedures contain detailed
procedures regarding the monitoring of
the operational capabilities of the
custodial banks). Outdated language
that contemplated a scenario where ICC
might have only one FRB securities
account has also been removed.
Amendments would identify market
risk management as well as liquidity
risk management as goals of ICC’s
policies relating to acceptable forms of
collateral and associated haircuts.
Certain typographical and other nonsubstantive drafting changes would be
made in the discussion of collateral
valuation.
ICC proposes revisions to the
collateral ‘‘haircut’’ sub-section of
Section V of the Treasury Policy.10 The
8 Treasury Policy Section IV. Sub-Section ‘‘A.7.
Failure of Settlement Bank to Perform.’’
9 Treasury Policy Section ‘‘V. Custodial Assets.’’
10 Treasury Policy Section V, Sub-Section ‘‘B.3.
Collateral ‘‘Haircut’’ Methodology.’’
E:\FR\FM\11SEN1.SGM
11SEN1
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
discussion of the collateral haircut
methodology would be revised to refer
to cash and non-cash collateral
generally, rather than just US Treasuries
and non-USD currencies (as the current
list of eligible collateral is not limited to
those specific assets). Other conforming
non-substantive changes will be made
consistent with the rest of the Treasury
Policy. Amendments would also require
that the Treasury Department provide a
report of current haircuts to the ICC Risk
Department at a minimum once a month
(as opposed to only once a month) and
require that the report be provided
whether or not changes were made
during the month. This approach
reflects ICC’s current practices. The
amendments would also reflect current
practice that haircuts are made publicly
available, and any haircut changes are
notified to CP’s (and not only on a
monthly basis). In the excess collateral
sub-section, ICC proposes noting that
requests by Clearing Participants to
transfer excess collateral must be
completed prior to 9:00 a.m. ET for both
EUR and British pound sterling (‘‘GBP’’)
denominated collateral rather than only
for EUR denominated collateral as this
sub-section did not contain the
applicable GBP deadline for the transfer
of excess GBP denominated collateral.
In the section of the Treasury Policy
relating to treasury management of
client business,11 various nonsubstantive drafting changes would be
made, including to use the defined
terms House Account, Client Account
and Client Positions and Margin and
conform references to various types of
cash and non-cash collateral. An
unnecessary reference to daily payment
processes would also be removed.
ICC also proposes revisions to the
treasury reconciliations section of the
Treasury Policy.12 As amended, the
Treasury Policy will clarify that the
Treasury Department conducts a daily
reconciliation process for its cash and
non-cash collateral accounts in
accordance with its internal procedures,
which include cite checks for validating
status of margin payments, a check of
prior-day cash balances, withdrawals,
and/or deposits, and a comparison of
current and expected balances. With
respect to the cite checks description,
ICC proposes to replace the vague and
undefined phrase ‘‘ISG requests’’ with
the generalized and descriptive phrase
‘‘transaction activity’’ to improve
clarity.
11 Treasury Policy Section ‘‘VI. Treasury
Management for Client Business.’’
12 Treasury Policy Section ‘‘VII. Treasury
Reconciliations.’’
VerDate Sep<11>2014
17:42 Sep 10, 2024
Jkt 262001
Other amendments would correct the
identification of ICC’s SWIFT BIC code
and update cross-references to ICC’s
Counterparty Monitoring Procedures
(which was formerly referred to as the
CDS Clearing Counterparty Monitoring
Procedures).
ICC also proposes changes to
Appendix 1: ICE Clear Credit Operating
Capital Investment Policy. The
amendments provide that the use of
direct investments in US Treasury
securities is not limited to cases where
other investments (e.g., reverse repo
investments) are unavailable; rather, the
revised guidelines would contemplate
the use of direct investments primarily
for stable balances (such as amounts
held for regulatory capital purposes).
ICC believes the change provides greater
flexibility for investment of such
balances while preserving the credit
quality of investments. Revisions to the
guidelines for reverse repo investments
in Appendix 2 would reflect that the
value of collateral must be 102% of the
invested amount (rather than within a
range of 100.5% to 102%). This change
reflects current market practice and
provides greater protection to ICC.
References to certain specific banks in
key contacts in Appendix 2 also will be
removed as unnecessary; ICC does not
believe such contacts need to be
maintained in the Treasury Policy,
given the likelihood of changes in
contact details.
ICC proposes a number of other
drafting clarifications and conforming
changes, such as updating names and
uses of relevant defined terms, deleting
outdated references and other nonsubstantive drafting improvements,
would also be made throughout the
Treasury Policy document. Various
provisions and footnotes would also be
relabeled or renumbered in the Treasury
Policy.
(b) Statutory Basis
ICE Clear Credit believes that the
proposed amendments to the Treasury
Policy are consistent with the
requirements of Section 17A of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 13 and the regulations thereunder
applicable to it. In particular, Section
17A(b)(3)(F) of the Act 14 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,
the safeguarding of securities and funds
in the custody or control of the clearing
agency or for which it is responsible,
and the protection of investors and the
public interest. The proposed
amendments are designed to generally
improve the clarity of the Treasury
Policy and make certain related
enhancements, including clarifying the
investment guidelines for investment of
ICC’s own capital, clarifications to the
roles and responsibilities of the ICC
Treasury Department function and
clarifications concerning SWIFT
messaging procedures. ICC believes the
changes to the investment guidelines
will facilitate stable investment of ICC’s
own capital and provide useful
flexibility for the clearing house. The
changes will not result in a change to
current ICC Treasury Department
practices. ICC therefore believes the
amendments will help ensure that the
Treasury Policy remain up-to-date and
clearly articulate ICC’s Treasury
Department practices, and as such will
promote the prompt and accurate
clearance and settlement of securities
transactions and derivatives agreements,
contracts and transactions, contribute to
the safeguarding of securities and funds
which are in the custody or control of
ICC or for which it is responsible, and
generally promote the protection of
investors and the public interest in the
operation of clearing services, within
the meaning of Section 17A(b)(3)(F) of
the Act.15
The amendments also comply with
relevant provisions of Rule 17Ad–22.16
In particular, Rule 17Ad–22(e)(5)
provides that ‘‘[e]ach covered clearing
agency shall establish, implement,
maintain and enforce written policies
and procedures reasonably designed to,
as applicable . . . [l]imit 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 if [it] requires collateral to
manage its or its participants’ credit
exposure, and require a review of the
sufficiency of its collateral haircuts and
concentration limits to be performed not
less than annually.’’ 17 As set forth
above, the amendments to the Treasury
Policy would make clarifying changes to
the responsibilities of the Treasury
Department and procedures relating to
the management of funds constituting
operating capital as well as GF
contributions and margin, banking
relationships, and acceptable collateral
and haircuts, among other matters. As
such, the amendments would facilitate
the ability of ICC to limit the assets it
15 15
13 15
U.S.C. 78q–1.
14 15 U.S.C. 78q–1(b)(3)(F).
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
73737
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22.
17 17 CFR 240.17Ad–22(e)(5).
16 17
E:\FR\FM\11SEN1.SGM
11SEN1
lotter on DSK11XQN23PROD with NOTICES1
73738
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
accepts as collateral to those with low
credit, market and liquidity risks,
consistent with the requirements of Rule
17Ad–22(e)(5).18
Rule 17Ad–22(e)(8) provides that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] define the point at which
settlement is final to be no later than the
end of the day on which the payment
or obligation is due and, where
necessary or appropriate, intraday or in
real time.’’ 19 The amendments would
state clearly the time at which
settlement of daily payments is deemed
final, as the earlier of (i) when ICC
receives the payment or (ii) when a
financial institution used by ICC sends
a relevant confirmation message that the
payment has been made, which is
consistent with ICC practice and is
within the timeframe required under
Rule 17Ad–22(e)(8).20
Rule 17Ad–22(e)(9) requires that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] conduct its money settlements in
central bank money, where available
and determined to be practical . . . and
minimize and manage credit and
liquidity risk arising from conducting its
monetary settlements in commercial
bank money if central bank money is
not used by the covered clearing
agency’’.21 As set forth above, the
amendments make certain clarifications
to the descriptions ICC’s settlement
banking arrangements (through FRB
accounts and with settlement banks) to
more clearly reflect current practice by
the clearing house. As such, in ICC’s
view, the amendments are consistent
with the requirements of Rule 17Ad–
22(e)(9).22
Rule 17Ad–22(e)(16) provides that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] safeguard the covered clearing
agency’s own and its participants’
assets, minimize the risk of loss and
delay in access to these assets, and
invest such assets in instruments with
minimal credit, market and liquidity
risks.’’ 23 As noted above, the
amendments would provide greater
flexibility for ICC to invest its own
24 17
CFR 240.17Ad–22(e)(16).
CFR 240.17 Ad–22(e)(3)(i).
26 17 CFR 240.17 Ad–22(e)(3)(i).
27 17 CFR 240.17 Ad–22(e)(2)(i).
28 17 CFR 240.17 Ad–22(e)(2)(v).
29 17 CFR 240.17 Ad–22(e)(2).
18 17
CFR 240.17Ad–22(e)(5).
CFR 240.17Ad–22(e)(8).
20 17 CFR 240.17Ad–22(e)(8).
21 17 CFR 240.17Ad–22(e)(9).
22 17 CFR 240.17Ad–22(e)(9).
23 17 CFR 240.17Ad–22(e)(16).
25 17
19 17
VerDate Sep<11>2014
17:42 Sep 10, 2024
capital through direct investments in US
treasury securities, particularly in the
case where it is investing stable
balances. In that context, and given the
maturity limitations that will
nonetheless apply, ICC believes that
such investments would have minimal
credit, market and liquidity risks for
ICC, and accordingly would be
consistent with Rule 17Ad–22(e)(16).24
Rule 17Ad–22(e)(3)(i) provides that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] identify, measure, monitor, and
manage the range of risks that arise in
or are borne by the covered clearing
agency’’.25 The Treasury Policy is
intended to assist ICC, among other
matters, in accurately assessing and
managing certain of its investment risks,
collateral risks and liquidity risks
relating to margin, GF and other assets
held by ICC. As set forth above, the
amendments are generally intended to
update the Treasury Policy and make
various drafting improvements for
purposes of clarifications. In keeping
the relevant policies up-to-date, ICC
believes the amendments are consistent
with the risk management requirements
of Rule 17Ad–22(e)(3)(i).26
Rule 17Ad–22(e)(2) provides that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] [p]rovide for governance
arrangements that are [c]lear and
transparent’’ 27 and ‘‘[s]pecify clear and
direct lines of responsibility.’’ 28 As
proposed to be revised, the Treasury
Policy would clearly state certain
responsibilities of the Treasury
Department, among other parts of ICC,
in relation to oversight of its practices
regarding treasury functions and
collateral management. The
amendments would make certain
clarifications and drafting
improvements that will keep these
aspects of the Treasury Policy up-todate and effective for their purposes. In
ICE Clear Credit’s view, the
amendments to the Treasury Policy are
therefore consistent with the
requirements of Rule 17Ad–22(e)(2).29
Jkt 262001
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
(B) Clearing Agency’s Statement on
Burden on Competition
ICE Clear Credit does not believe the
proposed amendments would have any
impact, or impose any burden, on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. The amendments
are being adopted to update and clarify
the Treasury Policy. As set forth above,
the proposed amendments are not
expected to materially change the
treasury operations of ICC but rather
update general language to more clearly
describe existing practices. Accordingly,
ICE Clear Credit does not believe the
amendments would affect the rights and
obligations of CP’s or the costs of
clearing, the ability of market
participants to access clearing, or the
market for clearing services generally.
Therefore, ICE Clear Credit does not
believe the proposed rule change
imposes 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 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 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 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-regulations/self-regulatoryorganization-rulemaking); or
E:\FR\FM\11SEN1.SGM
11SEN1
Federal Register / Vol. 89, No. 176 / Wednesday, September 11, 2024 / Notices
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ICC–2024–005 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.
lotter on DSK11XQN23PROD with NOTICES1
All submissions should refer to file
number SR–ICC–2024–005. 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-regulations/self-regulatoryorganization-rulemaking). 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
a.m. and 3 p.m. Copies of such filings
will also 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.
Do not include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to file number SR–ICC–2024–005 and
should be submitted on or before
October 2, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–20460 Filed 9–10–24; 8:45 am]
BILLING CODE 8011–01–P
30 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:42 Sep 10, 2024
Jkt 262001
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
35315; File No. 812–15498]
September 6, 2024.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
under sections 17(d) and 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
Summary of Application: Applicants
request an order to permit certain
business development companies
(‘‘BDCs’’) and closed-end management
investment companies to co-invest in
portfolio companies with each other and
with certain affiliated investment
entities.
Applicants: Great Elm Capital Corp,
Great Elm Capital Management, Inc.,
Great Elm Opportunities Fund I, L.P.—
Series A, Great Elm Opportunities Fund
I, L.P.—Series D, Great Elm Investments,
LLC and Great Elm Credit Income Fund,
LLC.
Filing Dates: The application was
filed on August 18, 2023 and amended
on December 4, 2023, March 7, 2024
and August 29, 2024.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing on any application by
emailing the SEC’s Secretary at
Secretarys-Office@sec.gov and serving
the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on October 1, 2024, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary at
Secretarys-Office@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Frm 00119
Fmt 4703
Sfmt 4703
Adam M. Kleinman, akleinman@
greatelmcap.com and Christopher
Healey, christopher.healey@
davispolk.com.
FOR FURTHER INFORMATION CONTACT:
Great Elm Capital Corp., et al.
PO 00000
73739
Barbara T. Heussler, Senior Counsel, or
Thomas Ahmadifar, Branch Chief, at
(202) 551–6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ third amended and restated
application, dated August 29, 2024,
which may be obtained via the
Commission’s website by searching for
the file number at the top of this
document, or for an Applicant using the
Company name search field, on the
SEC’s EDGAR system. The SEC’s
EDGAR system may be searched at,
https://www.sec.gov/edgar/searchedgar/
legacy/companysearch.html. You may
also call the SEC’s Public Reference
Room at (202) 551–8090.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–20574 Filed 9–10–24; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #20434 and #20435;
MINNESOTA Disaster Number MN–20003]
Presidential Declaration Amendment of
a Major Disaster for Public Assistance
Only for the State of Minnesota
Small Business Administration.
Amendment 3.
AGENCY:
ACTION:
This is an amendment of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Minnesota (FEMA–4797–
DR), dated 06/28/2024.
Incident: Severe Storms and Flooding.
Incident Period: 06/16/2024 through
07/04/2024.
DATES: Issued on 08/27/2024.
Physical Loan Application Deadline
Date: 09/26/2024.
Economic Injury (EIDL) Loan
Application Deadline Date: 03/28/2025.
ADDRESSES: Visit the MySBA Loan
Portal at https://lending.sba.gov to
apply for a disaster assistance loan.
FOR FURTHER INFORMATION CONTACT:
Alan Escobar, Office of Disaster
Recovery & Resilience, U.S. Small
Business Administration, 409 3rd Street
SW, Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUMMARY:
E:\FR\FM\11SEN1.SGM
11SEN1
]]>Agencies
[Federal Register Volume 89, Number 176 (Wednesday, September 11, 2024)]
[Notices]
[Pages 73734-73739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-20460]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100935; File No. SR-ICC-2024-005]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to ICC's Treasury Operations
Policies and Procedures
September 5, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ 15 U.S.C. 78s(b)(1) and Rule 19b-4,\2\ notice is hereby given
that on August 22, 2024, 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
primarily 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
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
(the ``Rules'').
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
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
(a) Purpose
ICE Clear Credit is proposing to amend its Treasury Policy. The
purpose of the Treasury Policy is to articulate the policies and
procedures used to support the ICC Treasury Department (the ``Treasury
Department''), which is responsible for daily cash and collateral
management of margin and guaranty fund assets. The purpose of the
proposed changes is to make various updates and clarifications,
including to further explain the goals and the responsibilities of the
ICC Treasury Department in performing treasury functions for cleared
contracts, as well as safeguarding securities and funds in custody. The
amendments also clarify the timing of the return of a withdrawing
Clearing Participant's (``CP'') guaranty fund (``GF'') deposit to be
consistent with the Rules, as discussed herein. The amendments would
clarify the ICC investment policy with respect to ICC's own operating
capital to provide greater flexibility to make direct investments, as
discussed below, and update various references to SWIFT messaging so as
not to become outdated. Various non-substantive drafting changes and
improvements would also be made throughout the Treasury Policy, such as
updating the use of defined terms, correcting typographical errors and
similar changes. The amendments do not represent a change in ICC's
practices relating to treasury management, but rather are intended to
improve and clarify the documentation and descriptions of such
practices.
ICC proposes to update the treasury department section of the
Treasury Policy.\3\ The amendments would update the statement of the
overall responsibilities of ICC, aided by the Treasury Department, to
specifically reference facilitating the prompt and accurate clearing
and settlement of securities transactions and derivatives, and
safeguarding securities and funds in ICC's custody or control for which
it is responsible. Additionally, the amendments would remove the
reference to the ICC Risk Management Framework when developing
investment and collateral management strategies. The amendments would
clarify certain references and terms throughout this section, such as
referencing the ``General Guaranty Fund'' as defined in ICC Rule 102,
as well as referencing cash and non-cash collateral (which was
previously phrased as ``cash and collateral'' or ``cash or
collateral'') throughout the Treasury Policy. With respect to the
Treasury Departments responsibilities to manage Guaranty Fund
requirements and ``posting'' by Clearing Participants, the amendments
would change the reference from ``posting'' to ``collateral postings''
to provide a clearer and more accurate description of Treasury's
responsibilities. Certain references to margin accounts, margin
payments and margin requirements or processes (and words of similar
effect) will be revised to refer more generally to accounts, payments
and related clearing or processes requirements (or requirements), in
order to more broadly reference overall payment requirements from the
clearing process (which include but are not limited to margin). The
amendments would highlight that ICE Clear Credit, rather than ICE Clear
Credit's Risk Department, generates daily requirements for all Clearing
Participants (including requirements for indirect participants i.e.,
Client-Related requirements) because such requirements are generated
automatically by ICE Clear Credit's clearing systems as opposed being
generated specifically by ICE Clear Credit's Risk Department. Further,
the amendments note that such daily requirements are based on the
Clearing Participants' cleared ``positions'' rather than their cleared
``trades'' as positions is a more accurate description of a Clearing
Participants cleared activity at ICE Clear Credit. The amendments also
clarify the Treasury Departments responsibility in ensuring that
payments are received from Clearing Participants by removing an
incorrect reference to ensuring that payments are honored by Clearing
Participants' banking relationships. Under ICC's existing direct
settlement model, as discussed below, Clearing Participants are
responsible to ensure that ICC timely receives all required payments;
completion of settlement is not based on whether a Clearing
Participant's bank honors a payment direction. Similarly, references to
settlement issues have been generalized to reference treasury
management related issues, and
[[Page 73735]]
references to substitution of collateral for cash have been replaced by
the more general description of performing collateral substitutions.
These changes do not reflect a substantive change in practice, but
rather are intended to provide a more comprehensive overall description
of relevant payment practices. In the statement of the Treasury
Departments role in developing of investment and collateral management
strategies, the amendments would remove an outdated reference to such
activities being done within the ICC Risk Management Framework, as the
relevant investment and collateral management policies are now set out
in the Treasury Policy rather than in the framework. The amendment
would also generalize a reference to cash management to the broader
term collateral management to more fully describe the scope of this
activity and for consistency throughout the Treasury Policy. The
amendments also clarify the organizational structure of the Treasury
Department function, as overseen by the ICC Treasury Director who
reports to the ICC Chief Operating Officer (``COO'') (and clarifies
that the ICC Treasury Department is not and has never been a part of
the operations department).
---------------------------------------------------------------------------
\3\ Treasury Policy Section ``II. The Treasury Department.''
---------------------------------------------------------------------------
ICC also proposes to update the funds management section of the
Treasury Policy.\4\ The amendments would add conforming references to
``requirements'' in certain places for consistency in referring to
margin and Guaranty Fund requirements. In addition, the amendments
would clarify or add various defined terms relating to margin,
including a defined term for ``Margin'' covering both initial and mark-
to-market margin. A definitional footnote relating to the Guaranty Fund
would be removed as unnecessary in light of prior references to that
term in the Treasury Policy. Additionally, the amendments would clarify
that the funds would include both cash and non-cash collateral. For
completeness and consistency with the existing Rules and other
procedures of ICC, the amendments would state that ICC maintains and
manages ``House Margin'' and ``Client Margin'' separately. The
amendments also clarify that required initial margin and GF
contributions are held in a manner that minimizes the risk of loss or
delay in access, consistent with regulatory requirements (which
reflects the standard under applicable regulations), rather than
referring only to highly liquid and short-term investments. Under
Section III.B., Investment Strategy, various conforming and non-
substantive drafting changes would be made, including to the use of
appropriate defined terms and consistent references to cash collateral
(instead of cash). References in the existing Treasury Policy to
certain investments to be made by the Director of Treasury would be
revised to simply refer to the Treasury Department as a whole,
reflecting actual practice that investments are made by Treasury
Department personnel subject to the supervision of the Director of
Treasury. In the discussion of investment of US dollar cash, additional
clarifying language would be added to this section such as describing
the role of the Federal Reserve Bank of Chicago (``FRB'') as a
depository and noting that US dollar cash may be invested in US
Treasury/Agency reverse repurchase agreements rather than just
Treasury/Agency reverse repurchase agreements. The amendments would
also reflect that ICC currently maintains multiple accounts (rather
than a single account) at the FRB, as discussed below. For reverse repo
transactions, the amendments would also remove an unnecessary
description of certain settlement arrangements and unnecessary
statements regarding steps ICC would take to ensure replacement
securities are eligible and valued correctly when a substitution of
securities becomes necessary (as ICC does not believe such matters are
relevant to the level of detail of the description contained in the
Treasury Policy). The amendments would revise the description of the
calculation of the minimum cash required to be invested in bilateral
reverse repos to reflect 45% of the top two Clearing Participants'
Margin requirements (taking into account specifically both initial and
mark-to-market margin requirements, as opposed to referencing the
generalized phrase ``risk margin''), as ICC believes that this is the
more detailed and accurate description of ICC's current practices.
Additionally, the amendments would acknowledge that bilateral reverse
repo transactions may be settled through alternative counterparties
that may be added in the future to account for the possibility that ICE
Clear Credit's financial service provider relationships may change in
the future. The amendments would also clarify that ICC in practice uses
more than one outside investment manager to facilitate its investment
of Guaranty Fund and margin cash.
---------------------------------------------------------------------------
\4\ Treasury Policy Section ``III. Funds Management.''
---------------------------------------------------------------------------
ICC also proposes revisions to the Tables of collateral liquidity
requirements contained in Section III of the Treasury Policy \5\ to
update various defined terms and references (both in the text of the
Tables and the titles of the Tables) to be consistent with the other
amendments being made to the Treasury Policy, such as to use the
defined term Margin and to conform the terminology for the currencies
and collateral (US Dollar Cash, EUR Cash, and US Treasury Securities).
An amendment will also change a reference from ``assets'' to
``collateral'', to more precisely describe the collateral being
described. A statement relating to additional margin that may be called
where a clearing participant does not meet the required liquidity
requirements has been clarified to refer more precisely to initial
margin. In addition, ICC proposes revising the participant withdrawals'
sub-section of Section III of the Treasury Policy \6\ to reflect that
the requirements described are based on the ICC Rules and to add a
statement that Guaranty Fund deposits will not be returned until after
all positions of the withdrawing participant have been closed out and
all liabilities of the participant to ICC have been satisfied, in order
to be consistent with the requirements of existing Rule 807. The
amendments would also remove a statement that if a participant provides
notice of withdrawal less than 60 days from the end of the calendar
quarter, its withdrawal will not be effective until the end of the
following quarter, as this requirement is not set forth in the Rules.
---------------------------------------------------------------------------
\5\ Table 1 Collateral Liquidation Assumptions (US Dollar
denominated requirements); Table 2 Collateral Liquidation
Assumptions (Euro denominated requirements); Table 3 House Initial
Margin & Guaranty Fund Liquidity Requirements (Non-Client US Dollar
denominated requirements); and Table 4 House Initial Margin &
Guaranty Fund Liquidity Requirements (Non-Client Euro denominated
requirements) (collectively, the ``Tables'').
\6\ Treasury Policy Section III, Sub-Section ``D. Participants'
Withdrawal.''
---------------------------------------------------------------------------
The discussion of ICC's use of committed repo facilities would
clarify that any expenses (including but not limited to interest
expenses) incurred through such facilities following a Clearing
Participant default will be attributed to the account of that CP,
consistent with the general approach for allocation of close-out costs
to a defaulter under the Rules.
ICC proposes revising the cash settlement section of the Treasury
Policy.\7\ Under the cash settlement section, the examples of types of
transaction payments have been expanded to include options premia and
interest on Mark-to-Market Margin, reflecting current practice. The
amendments would also add further
[[Page 73736]]
explanation of the existing ICC direct settlement model used to manage
cash movements, for consistency and to provide greater clarity as to
settlement operations. As described, the direct settlement requires the
Clearing Participants to establish settlement bank arrangements and
make requested payments to ICC in the required timeframe. ICC maintains
direct debit authority over the settlement bank accounts of Clearing
Participants.
---------------------------------------------------------------------------
\7\ Treasury Policy Section ``IV. Cash Settlement.''
---------------------------------------------------------------------------
In addition, the amendments to Section IV would add to the current
criteria for ICE Clear Credit's settlement banks (which include
requirements as to regulation and supervision, capital requirements for
non-US institution, absence of majority sovereign ownership, internal
ICC credit requirements and operational capability) a requirement that
the bank provide specific liquidity information, in order to facilitate
management by ICC of liquidity risk from settlement arrangements. This
would include providing information as to the bank's liquidity coverage
ratio, and if that is not reported by the bank, ICC would use other
criteria (e.g., requesting a description of the bank's liquidity risk
management policy and/or requesting the liquidity coverage ratio of the
bank's affiliated reporting entity within the bank's group) based on
ICC's discretion, to assess the liquidity risks arising from settlement
banks. In addition, as revised, the Treasury Policy would no longer
specify particular backup settlement banks for ICC but reference a
general requirement for ICC to maintain appropriate backup
relationships. ICC believes this approach is preferable and avoids the
need to amend the Treasury Policy if backup arrangements change.
The amendments would add further description of the daily
settlement process (including as to cases where no net settlement is
owed and bank holidays), as set forth below. Consistent with the added
description of the direct settlement model as noted above, the
amendments would state the responsibility of Clearing Participants to
ensure that ICC timely receives all requested payments and note that
failure to make timely payments may be a default. This proposed change
provides greater clarity as to ICC's current practices. In the
discussion of routine settlement procedures, an erroneous reference to
contacting an agent bank in the event of a late payment would be
removed (as the Clearing Participant would be contacted directly). The
amendments would also add statements describing the daily settlement
process as being conducted every business day and regarding the timing
of settlement finality under the direct settlement model. Consistent
with current practice, settlement would be deemed final and irrevocable
at the earlier of the time when ICC received the relevant payment, or a
financial institution used by ICC sends a confirmation message that
payment has been made. As noted above, the amendments would also remove
references to various specific types of SWIFT messages (in light of the
possibility that specific SWIFT message types may be modified, renamed
or changed from time to time by SWIFT), and describe such messages more
generally. In the case of non-routine settlement, the amendments would
remove an unnecessary reference to a specific SWIFT settlement
instruction, since ICC and the Clearing Participant in question would
be expected to separately confirm the particulars of the settlement.
In the discussion of a SWIFT outage, the amendments would clarify
that the relevant scenario arises where ICC is unable to send SWIFT
messages to the Clearing Participants' settlement banks (correcting an
erroneous reference to ICC's direct settlement banks). The amendments
would revise certain procedures for communicating directly with CP's in
the event of a SWIFT outage (removing an incorrect reference to
communicating with ICC's direct settlement banks as above). The
amendments would also address correcting or re-issuing a SWIFT message
in the event of a non-payment for certain technical reasons and remove
certain references to specific types of SWIFT messages or reports that
ICC believes are unnecessary, and such specific message types may be
modified, renamed or changed from time to time (as noted above). The
amendment would also remove a requirement that certain emails be
password protected (as ICC does not believe email security measures
need to be set out in the Treasury Policy). With respect to the
discussion of bank-to-bank messages, the amendments would remove
references to specific settlement banks and instead refer to the
applicable ICC settlement bank generally (to avoid the need to amend
the Treasury Policy in the event of any change in settlement banks).
With respect to the scenario where a bank rejects a SWIFT debt message
because of a technical defect, the amendments will remove a specific
requirement to manually update the transaction summary report and
manually initiate a specific reversal or correction message and add
instead a general obligation to correct the prior message or reissue a
corrected message.
ICC proposes revisions to settlement bank failure sub-section of
Section IV of the Treasury Policy.\8\ In the event that a settlement
bank fails to perform, ICE Clear Credit would instruct the CP to wire
the funds to the ICE Clear Credit accounts at an alternate settlement
bank. The amendments broaden the list of such alternate settlement
banks that may be designated by ICC.
---------------------------------------------------------------------------
\8\ Treasury Policy Section IV. Sub-Section ``A.7. Failure of
Settlement Bank to Perform.''
---------------------------------------------------------------------------
In the discussion of ICC's use of the FRB Accounts for depository
purposes, the amendments would update the Treasury Policy to reflect
that ICC currently maintains separate FRB Accounts for house and client
margin in light of applicable segregation requirements (removing and
updating certain outdated language that contemplated a scenario where
ICC might only have one FRB account). Other amendments in this section
make non-substantive changes to the use of defined terms (including new
terms House Account and Client Account as well as replacing FRB
customer cash account and FRB House cash account with FRB House Account
and replacing FRB Client cash account with FRB Client Account). Certain
conforming changes would also be made to consistently refer to Guaranty
Fund and House Accounts in this section.
Further, ICC proposes revisions to the custodial assets section of
the Treasury Policy.\9\ The amendments would reference ongoing
monitoring according to ICE Clear Credit's Counterparty Monitoring
Procedures (rather than identifying only a specific annual report that
is no longer required to be submitted as ICC Counterparty Monitoring
Procedures contain detailed procedures regarding the monitoring of the
operational capabilities of the custodial banks). Outdated language
that contemplated a scenario where ICC might have only one FRB
securities account has also been removed. Amendments would identify
market risk management as well as liquidity risk management as goals of
ICC's policies relating to acceptable forms of collateral and
associated haircuts. Certain typographical and other non-substantive
drafting changes would be made in the discussion of collateral
valuation.
---------------------------------------------------------------------------
\9\ Treasury Policy Section ``V. Custodial Assets.''
---------------------------------------------------------------------------
ICC proposes revisions to the collateral ``haircut'' sub-section of
Section V of the Treasury Policy.\10\ The
[[Page 73737]]
discussion of the collateral haircut methodology would be revised to
refer to cash and non-cash collateral generally, rather than just US
Treasuries and non-USD currencies (as the current list of eligible
collateral is not limited to those specific assets). Other conforming
non-substantive changes will be made consistent with the rest of the
Treasury Policy. Amendments would also require that the Treasury
Department provide a report of current haircuts to the ICC Risk
Department at a minimum once a month (as opposed to only once a month)
and require that the report be provided whether or not changes were
made during the month. This approach reflects ICC's current practices.
The amendments would also reflect current practice that haircuts are
made publicly available, and any haircut changes are notified to CP's
(and not only on a monthly basis). In the excess collateral sub-
section, ICC proposes noting that requests by Clearing Participants to
transfer excess collateral must be completed prior to 9:00 a.m. ET for
both EUR and British pound sterling (``GBP'') denominated collateral
rather than only for EUR denominated collateral as this sub-section did
not contain the applicable GBP deadline for the transfer of excess GBP
denominated collateral.
---------------------------------------------------------------------------
\10\ Treasury Policy Section V, Sub-Section ``B.3. Collateral
``Haircut'' Methodology.''
---------------------------------------------------------------------------
In the section of the Treasury Policy relating to treasury
management of client business,\11\ various non-substantive drafting
changes would be made, including to use the defined terms House
Account, Client Account and Client Positions and Margin and conform
references to various types of cash and non-cash collateral. An
unnecessary reference to daily payment processes would also be removed.
---------------------------------------------------------------------------
\11\ Treasury Policy Section ``VI. Treasury Management for
Client Business.''
---------------------------------------------------------------------------
ICC also proposes revisions to the treasury reconciliations section
of the Treasury Policy.\12\ As amended, the Treasury Policy will
clarify that the Treasury Department conducts a daily reconciliation
process for its cash and non-cash collateral accounts in accordance
with its internal procedures, which include cite checks for validating
status of margin payments, a check of prior-day cash balances,
withdrawals, and/or deposits, and a comparison of current and expected
balances. With respect to the cite checks description, ICC proposes to
replace the vague and undefined phrase ``ISG requests'' with the
generalized and descriptive phrase ``transaction activity'' to improve
clarity.
---------------------------------------------------------------------------
\12\ Treasury Policy Section ``VII. Treasury Reconciliations.''
---------------------------------------------------------------------------
Other amendments would correct the identification of ICC's SWIFT
BIC code and update cross-references to ICC's Counterparty Monitoring
Procedures (which was formerly referred to as the CDS Clearing
Counterparty Monitoring Procedures).
ICC also proposes changes to Appendix 1: ICE Clear Credit Operating
Capital Investment Policy. The amendments provide that the use of
direct investments in US Treasury securities is not limited to cases
where other investments (e.g., reverse repo investments) are
unavailable; rather, the revised guidelines would contemplate the use
of direct investments primarily for stable balances (such as amounts
held for regulatory capital purposes). ICC believes the change provides
greater flexibility for investment of such balances while preserving
the credit quality of investments. Revisions to the guidelines for
reverse repo investments in Appendix 2 would reflect that the value of
collateral must be 102% of the invested amount (rather than within a
range of 100.5% to 102%). This change reflects current market practice
and provides greater protection to ICC. References to certain specific
banks in key contacts in Appendix 2 also will be removed as
unnecessary; ICC does not believe such contacts need to be maintained
in the Treasury Policy, given the likelihood of changes in contact
details.
ICC proposes a number of other drafting clarifications and
conforming changes, such as updating names and uses of relevant defined
terms, deleting outdated references and other non-substantive drafting
improvements, would also be made throughout the Treasury Policy
document. Various provisions and footnotes would also be relabeled or
renumbered in the Treasury Policy.
(b) Statutory Basis
ICE Clear Credit believes that the proposed amendments to the
Treasury Policy are consistent with the requirements of Section 17A of
the Securities Exchange Act of 1934 (the ``Act'') \13\ and the
regulations thereunder applicable to it. In particular, Section
17A(b)(3)(F) of the Act \14\ 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, the safeguarding of securities and funds in the custody
or control of the clearing agency or for which it is responsible, and
the protection of investors and the public interest. The proposed
amendments are designed to generally improve the clarity of the
Treasury Policy and make certain related enhancements, including
clarifying the investment guidelines for investment of ICC's own
capital, clarifications to the roles and responsibilities of the ICC
Treasury Department function and clarifications concerning SWIFT
messaging procedures. ICC believes the changes to the investment
guidelines will facilitate stable investment of ICC's own capital and
provide useful flexibility for the clearing house. The changes will not
result in a change to current ICC Treasury Department practices. ICC
therefore believes the amendments will help ensure that the Treasury
Policy remain up-to-date and clearly articulate ICC's Treasury
Department practices, and as such will promote the prompt and accurate
clearance and settlement of securities transactions and derivatives
agreements, contracts and transactions, contribute to the safeguarding
of securities and funds which are in the custody or control of ICC or
for which it is responsible, and generally promote the protection of
investors and the public interest in the operation of clearing
services, within the meaning of Section 17A(b)(3)(F) of the Act.\15\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78q-1.
\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The amendments also comply with relevant provisions of Rule 17Ad-
22.\16\ In particular, Rule 17Ad-22(e)(5) provides that ``[e]ach
covered clearing agency shall establish, implement, maintain and
enforce written policies and procedures reasonably designed to, as
applicable . . . [l]imit 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 if [it]
requires collateral to manage its or its participants' credit exposure,
and require a review of the sufficiency of its collateral haircuts and
concentration limits to be performed not less than annually.'' \17\ As
set forth above, the amendments to the Treasury Policy would make
clarifying changes to the responsibilities of the Treasury Department
and procedures relating to the management of funds constituting
operating capital as well as GF contributions and margin, banking
relationships, and acceptable collateral and haircuts, among other
matters. As such, the amendments would facilitate the ability of ICC to
limit the assets it
[[Page 73738]]
accepts as collateral to those with low credit, market and liquidity
risks, consistent with the requirements of Rule 17Ad-22(e)(5).\18\
---------------------------------------------------------------------------
\16\ 17 CFR 240.17Ad-22.
\17\ 17 CFR 240.17Ad-22(e)(5).
\18\ 17 CFR 240.17Ad-22(e)(5).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(8) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable [. . .] define the
point at which settlement is final to be no later than the end of the
day on which the payment or obligation is due and, where necessary or
appropriate, intraday or in real time.'' \19\ The amendments would
state clearly the time at which settlement of daily payments is deemed
final, as the earlier of (i) when ICC receives the payment or (ii) when
a financial institution used by ICC sends a relevant confirmation
message that the payment has been made, which is consistent with ICC
practice and is within the timeframe required under Rule 17Ad-
22(e)(8).\20\
---------------------------------------------------------------------------
\19\ 17 CFR 240.17Ad-22(e)(8).
\20\ 17 CFR 240.17Ad-22(e)(8).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(9) requires that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable [. . .] conduct its
money settlements in central bank money, where available and determined
to be practical . . . and minimize and manage credit and liquidity risk
arising from conducting its monetary settlements in commercial bank
money if central bank money is not used by the covered clearing
agency''.\21\ As set forth above, the amendments make certain
clarifications to the descriptions ICC's settlement banking
arrangements (through FRB accounts and with settlement banks) to more
clearly reflect current practice by the clearing house. As such, in
ICC's view, the amendments are consistent with the requirements of Rule
17Ad-22(e)(9).\22\
---------------------------------------------------------------------------
\21\ 17 CFR 240.17Ad-22(e)(9).
\22\ 17 CFR 240.17Ad-22(e)(9).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(16) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable [. . .] safeguard the
covered clearing agency's own and its participants' assets, minimize
the risk of loss and delay in access to these assets, and invest such
assets in instruments with minimal credit, market and liquidity
risks.'' \23\ As noted above, the amendments would provide greater
flexibility for ICC to invest its own capital through direct
investments in US treasury securities, particularly in the case where
it is investing stable balances. In that context, and given the
maturity limitations that will nonetheless apply, ICC believes that
such investments would have minimal credit, market and liquidity risks
for ICC, and accordingly would be consistent with Rule 17Ad-
22(e)(16).\24\
---------------------------------------------------------------------------
\23\ 17 CFR 240.17Ad-22(e)(16).
\24\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(3)(i) provides that ``[e]ach covered clearing
agency shall establish, implement, maintain and enforce written
policies and procedures reasonably designed to, as applicable [. . .]
identify, measure, monitor, and manage the range of risks that arise in
or are borne by the covered clearing agency''.\25\ The Treasury Policy
is intended to assist ICC, among other matters, in accurately assessing
and managing certain of its investment risks, collateral risks and
liquidity risks relating to margin, GF and other assets held by ICC. As
set forth above, the amendments are generally intended to update the
Treasury Policy and make various drafting improvements for purposes of
clarifications. In keeping the relevant policies up-to-date, ICC
believes the amendments are consistent with the risk management
requirements of Rule 17Ad-22(e)(3)(i).\26\
---------------------------------------------------------------------------
\25\ 17 CFR 240.17 Ad-22(e)(3)(i).
\26\ 17 CFR 240.17 Ad-22(e)(3)(i).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(2) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable [. . .] [p]rovide for
governance arrangements that are [c]lear and transparent'' \27\ and
``[s]pecify clear and direct lines of responsibility.'' \28\ As
proposed to be revised, the Treasury Policy would clearly state certain
responsibilities of the Treasury Department, among other parts of ICC,
in relation to oversight of its practices regarding treasury functions
and collateral management. The amendments would make certain
clarifications and drafting improvements that will keep these aspects
of the Treasury Policy up-to-date and effective for their purposes. In
ICE Clear Credit's view, the amendments to the Treasury Policy are
therefore consistent with the requirements of Rule 17Ad-22(e)(2).\29\
---------------------------------------------------------------------------
\27\ 17 CFR 240.17 Ad-22(e)(2)(i).
\28\ 17 CFR 240.17 Ad-22(e)(2)(v).
\29\ 17 CFR 240.17 Ad-22(e)(2).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Credit does not believe the proposed amendments would
have any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The amendments
are being adopted to update and clarify the Treasury Policy. As set
forth above, the proposed amendments are not expected to materially
change the treasury operations of ICC but rather update general
language to more clearly describe existing practices. Accordingly, ICE
Clear Credit does not believe the amendments would affect the rights
and obligations of CP's or the costs of clearing, the ability of market
participants to access clearing, or the market for clearing services
generally. Therefore, ICE Clear Credit does not believe the proposed
rule change imposes 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
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 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 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-regulations/self-regulatory-organization-rulemaking);
or
[[Page 73739]]
Send an email to [email protected]. Please include
file number SR-ICC-2024-005 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-ICC-2024-005. 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-regulations/self-regulatory-organization-rulemaking). 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 a.m. and 3
p.m. Copies of such filings will also 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.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-ICC-2024-005 and should
be submitted on or before October 2, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
---------------------------------------------------------------------------
\30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-20460 Filed 9-10-24; 8:45 am]
BILLING CODE 8011-01-P
