81 FR 55254 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise the ICC Treasury Operations Policies and Procedures

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 160 (August 18, 2016)

[Federal Register Volume 81, Number 160 (Thursday, August 18, 2016)]
[Notices]
[Pages 55254-55256]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19688]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78566; File No. SR-ICC-2016-009]


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

August 12, 2016.

I. Introduction

    On June 15, 2016, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to revise the ICC 
Treasury Operations Policies and Procedures to provide for the use of a 
committed foreign exchange (``FX'') facility, to make changes to the 
investment guidelines as well as additional clean-up changes, and to 
provide additional clarification regarding the calculation of 
collateral haircuts (SR-ICC-2016-009). The proposed rule change was 
published for comment in the Federal Register on June 30, 2016.\3\ The 
Commission did not receive comments on the proposed rule change. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-78205 (June 30, 
2016), 81 FR 44357 (July 7, 2016) (SR-ICC-2016-009).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    ICC will revise its Treasury Operations Policies and Procedures to 
provide for the use of a committed FX facility. ICC has established a 
committed FX facility which provides for same day settled spot FX 
transactions. ICC represents that the facility allows ICC to use 
available United States Dollars (``USD'') to convert into Euro to meet 
a Euro liquidity need, for example in the

[[Page 55255]]

unlikely event of a Clearing Participant default when Euro is needed 
for liquidity but only USD is available. In addition, the policy will 
be revised to document that the FX facility will be tested twice a 
year.
    Additionally, ICC will revise its Treasury Operations Policies and 
Procedures to make changes to the ICC Treasury Department investment 
guidelines for operating capital, guaranty fund, and margin cash. ICC 
will update the list of permitted investments to add short term US 
Treasury securities (with a final maturity of no greater than 98 days) 
and remove Money Market Mutual Funds. ICC will also update its 
investment policy for operating capital to include Treasury/agency 
reverse repurchase (``repo'') agreements. ICC will update the 
governance section of the operating capital investment policy to note 
that the Risk Committee will review any proposed changes to the policy 
and make recommendations to the Board. Further, ICC will remove 
reference to an obsolete financial report.
    ICC will make additional clean-up changes throughout the Treasury 
Operations Policies and Procedures. Specifically, ICC will remove 
outdated language stating that ICC treasury services are provided by 
The Clearing Corporation. Further, throughout the document, ICC will 
change references to the ``Director of Operations'' to the ``Chief 
Operating Officer,'' to correctly reflect the officer title. ICC will 
remove reference to specific reverse repo counterparties to reflect the 
addition of multiple reverse repo counterparties. Further, ICC has 
noted that it has arrangements in place to settle tri-party and 
bilateral reverse repo transactions, both of which settle delivery vs. 
payment (``DVP''). As a result, ICC will clarify references throughout 
the policy from ``DVP reverse repo'' to more specifically refer to 
``bilateral reverse repo.'' ICC will remove reference to the titles of 
specific agreements that it may enter into to effect reverse repo 
transactions and add general language to encompass all agreements that 
may be required. ICC will remove information regarding the monitoring 
of available liquidity resources and add reference to the ICC Liquidity 
Risk Management Framework. ICC has clarified that its committed repo 
facility may be used to convert sovereign debt into cash and that the 
facility will be tested twice per calendar year. ICC will remove 
outdated information under the ``ICE Clear Credit Banking 
Relationships'' section of the policy and add language stating that ICC 
endeavors to maintain banking relationships with highly creditworthy 
and reliable bank institutions that provide operational and strategic 
support with respect to holding margin and guaranty fund cash and 
collateral. ICC also will remove references to specific banking 
counterparties, as ICC's banking relationships have expanded to include 
multiple counterparties. ICC will replace the specific names with a 
generic reference, to capture all counterparties utilized by ICC. ICC 
also will update certain SWIFT banking information throughout the 
policy. Further, ICC will update the list of applications used by the 
Treasury Department to perform daily operations.
    Finally, ICC will revise its Treasury Operations Policies and 
Procedures to provide additional clarification regarding the 
calculation of collateral haircuts when yield rates are less than or 
equal to one basis point. This change will document current ICC 
practices as related to collateral haircut calculation; there will be 
no change to the collateral haircut methodology.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \5\ requires, among other things, that the rules of a 
clearing agency are designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions and to 
comply with the provisions of the Act and the rules and regulations 
thereunder.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change is consistent 
with the requirements of Section 17A of the Act \6\ and the rules and 
regulations thereunder applicable to ICC. ICC asserts that the changes 
to provide for the use of a committed FX facility will enhance ICC's 
liquidity resources, and the changes to the investment guidelines will 
ensure the reliable investment of assets in ICC's control with minimal 
risk. ICC further asserts that the additional clean-up changes will 
ensure that the documentation of ICC's treasury arrangements remains 
up-to-date, clear, and transparent. Similarly, ICC represents that the 
additional clarification regarding the calculation of collateral 
haircuts will promote transparency of ICC's risk management practices 
as related to collateral haircuts. The Commission therefore believes 
that the proposed rule changes are designed to promote the prompt and 
accurate settlement of securities transactions and, to the extent 
applicable, derivatives agreements, contracts, and transactions, and to 
contribute to the safeguarding of customer funds and securities within 
the control of ICC in accordance with Section 17A(b)(3)(F) of the 
Act.\7\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    In addition, the Commission finds that the proposed revisions to 
the ICC Treasury Operations Policies and Procedures are consistent with 
the relevant requirements of Rule 17Ad-22.\8\ In particular, the use of 
a committed FX facility is intended to further ensure that ICC 
maintains sufficient financial resources at all times to meet the 
requirements set forth in Rule 17Ad-22(b)(3).\9\ Additionally, the 
changes to the investment guidelines are aimed to minimize credit, 
market, and liquidity risks of investment arrangements. Such changes 
are therefore reasonably designed to meet the requirements of Rule 
17Ad-22(d)(3).\10\ Finally, the additional clean-up changes and 
clarification regarding the calculation of collateral haircuts are 
constructed to ensure ICC's governance arrangements to remain clear and 
transparent, consistent with the requirements of Rule 17Ad-
22(d)(8).\11\
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17Ad-22.
    \9\ 17 CFR 240.17Ad-22(b)(3).
    \10\ 17 CFR 240.17Ad-22(d)(3).
    \11\ 17 CFR 240.17Ad-22(d)(8).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \12\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-ICC-2016-009) be, 
and hereby is, approved.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 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 55256]]


---------------------------------------------------------------------------

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19688 Filed 8-17-16; 8:45 am]
 BILLING CODE 8011-01-P