Notice2026-02333
ICE Clear Credit LLC; Order Granting an Application for Registration as a Clearing Agency Under Section 17A of the Securities Exchange Act of 1934
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 6, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 25 (Friday, February 6, 2026)</title>
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[Federal Register Volume 91, Number 25 (Friday, February 6, 2026)]
[Notices]
[Pages 5528-5544]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-02333]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104762; File No. 600-45]
ICE Clear Credit LLC; Order Granting an Application for
Registration as a Clearing Agency Under Section 17A of the Securities
Exchange Act of 1934
January 30, 2026.
I. Introduction
On August 1, 2025, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') an application on
Form CA-1 (``Application'') under Section 17A of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ seeking to register as a
clearing agency to provide central counterparty (``CCP'') services for
transactions involving U.S. Treasury securities, which ICC refers to as
its ``Treasury Business.'' Such services would be provided by ICC, the
same entity that is already deemed registered as a clearing agency with
respect to other services.\2\ Notice of the Application was published
for comment in the Federal Register on August 21, 2025.\3\ On November
18, 2025, the Commission instituted proceedings pursuant to Section
19(a)(1)(B) of the Exchange Act to determine whether to grant or deny
the Application.\4\
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\1\ 15 U.S.C. 78q-1.
\2\ ICC started in 2009 as ICE Trust U.S. and was regulated as a
bank by the New York State Banking Department and the Federal
Reserve Board of Governors. In 2011, ICC converted to a Delaware
limited liability company and changed its name to ICE Clear Credit
LLC. On July 16, 2011, pursuant to Section 17A(l) of the Exchange
Act, ICC was deemed registered with the Commission as a clearing
agency solely for the purpose of clearing security-based swaps.
Since then, ICC has been operating an ongoing business related to
the clearance of credit-default swaps (``CDS''), which ICC refers to
as its ``CDS Business.'' Although the Application pertains to ICC's
proposed Treasury Business, the Application also contains
information about the CDS Business, and where relevant, this Order
refers to information pertaining to ICC's existing CDS Business,
including referring to ICC's existing, publicly available disclosure
framework regarding the CDS Business (the ``Disclosure Framework'').
See ICC Disclosure Framework, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>. References in
this Order to the CDS Business are made to the extent relevant to
the Application, for instance with respect to issues that pertain to
ICC as an entity. As described in the Application, the Treasury
Business would be distinct from ICC's existing CDS Business, having
separate membership requirements, financial risk management and
default waterfalls, and rulebooks. See Exhibit J of the Application.
If ICC determines in the future to provide clearing agency services
other than its Treasury Business or CDS Business, or to perform the
functions of a clearing agency for transactions in other types of
securities, ICC would need to amend its application on Form CA-1 to
so reflect and submit any related proposed rule changes as required
under Section 19(b) of the Exchange Act. Capitalized terms not
otherwise defined in this order are defined in the Application.
\3\ Release No. 34-103727 (Aug. 18, 2025), 90 FR 40879 (Aug. 21,
2025) (``Notice''). Non-confidential aspects of the Application,
including any exhibits thereto cited in this order, are available on
the Commission's website at: <a href="https://www.sec.gov/rules-regulations/commission-orders-notices/icc-form-ca-1">https://www.sec.gov/rules-regulations/commission-orders-notices/icc-form-ca-1</a>.
\4\ Release No. 34-104195 (Nov. 18, 2025), 90 FR 52752 (Nov. 21,
2025).
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The Commission received comment letters, as well as a response
letter from ICC.\5\ The comment letters generally supported the
expansion of access to the clearing of transactions in U.S. Treasury
securities through the approval of new clearing agencies, including
ICC, but also expressed concerns with the Application and recommended
certain changes. The comment letters received, and ICC's response
letter thereto, are discussed in Part III.
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\5\ The public comment file for the Application is available on
the Commission's website at: <a href="https://www.sec.gov/comments/600-45/600-45.htm">https://www.sec.gov/comments/600-45/600-45.htm</a>.
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This order grants ICC's Application for registration as a clearing
agency for the reasons set forth in Part III below.
II. Statutory Standard for Registration as a Clearing Agency
Clearing agencies are broadly defined under the Exchange Act and
undertake a variety of functions,\6\ including providing the services
of a CCP.\7\ Pursuant to Section 17A of the Exchange Act and Rule
17Ab2-1 thereunder, an entity that meets the definition of a clearing
agency must register with the Commission (or obtain from the Commission
an exemption from registration prior to performing the functions of a
clearing agency).\8\ In addition to the requirements set forth in Rule
17Ab2-1, Section 19(a)(1) of the Exchange Act establishes the standard
for Commission review of an application for registration as a clearing
agency. Pursuant thereto, the Commission shall grant registration of a
clearing agency if it finds that the requirements of the Exchange Act
and the rules and regulations thereunder with respect to the applicant
are satisfied.\9\ The Commission shall deny such registration if it
does not make such finding.\10\
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\6\ 15 U.S.C. 78c(a)(23)(A) (providing the definition of
``clearing agency''); see also Release No. 34-78961 (Sept. 28,
2016), 81 FR 70786, 70897 (Oct 13, 2016) (``CCA Standards Adopting
Release'') (stating that clearing agencies are broadly defined in
the Exchange Act and undertake a variety of functions).
\7\ See 17 CFR 240.17ad-22(a)(2) (defining ``central
counterparty'' as a clearing agency that interposes itself between
counterparties to securities transactions, acting functionally as
the buyer to every seller and the seller to every buyer).
\8\ 15 U.S.C. 78q-1(b); 17 CFR 240.17ab2-1 (``Rule 17Ab2-1'').
\9\ 15 U.S.C. 78q-1; 15 U.S.C. 78s(a)(1).
\10\ 15 U.S.C. 78s(a)(1).
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The requirements of the Exchange Act applicable to clearing
agencies are set forth in Section 17A of the Exchange Act and the rules
and regulations thereunder.\11\ Accordingly, to grant ICC's Application
for registration as a clearing agency, the Commission must find that
the Application satisfies the requirements of Section 17A(b) of the
Exchange Act and rules and regulations thereunder, including the
determinations set forth in paragraphs (A) through (I) of Section
17A(b)(3) of the Exchange Act.\12\
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\11\ Rules for registered clearing agencies include
recordkeeping requirements, 17 CFR 240.17a-1; the filing process for
proposed rule changes, 17 CFR 240.19b-4; rules addressing operations
and risk management, governance and conflicts of interest, and plans
for recovery and wind-down at, respectively, 17 CFR 240.17ad-22
(``Rule 17Ad-22''), 240.17ad-25 (``Rule 17Ad-25''), and 240.17ad-26
(``Rule 17Ad-26''); and the requirements set forth in Regulation
Systems Compliance and Integrity, 17 CFR 242.1000 et seq.
(``Regulation SCI''). The Commission conducts ongoing monitoring of
registered clearing agencies through its supervisory program for
registered clearing agencies. The Commission also assesses
compliance with Commission rules by conducting examinations and
investigations. See 15 U.S.C. 78q(b); 15 U.S.C. 78u(a).
\12\ 15 U.S.C. 78s(a); 15 U.S.C. 78q-1(b)(3)(A)-(I). The
determinations are described further below.
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After a clearing agency's application for registration is granted,
the clearing agency must continue to satisfy the requirements of the
Exchange Act and the rules and regulations thereunder. The Commission
has explained that ``[a]n approval of clearing agency registration does
not mean that no further modifications of the applicant's rules,
systems, procedures, or practices are needed.'' \13\ Rather, the
Commission stated that a registered clearing agency's obligation to
continue to satisfy the requirements of the Exchange Act and the rules
and regulations thereunder means that ``[t]he self-regulatory
obligations of [a] fully registered clearing agenc[y] cannot end''
after registration.\14\ To ensure such compliance, the Commission
stated that it ``will continue to use its oversight, inspection, and
enforcement authority
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as necessary and appropriate to further the purposes of the [Exchange]
Act.'' \15\
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\13\ See Release No. 34-69838 (June 24, 2013), 78 FR 39027,
39029 (June 28, 2013) (approving an application by the Fixed Income
Clearing Corporation for permanent registration as a clearing
agency).
\14\ See Release No. 34-20221 (Sept. 23, 1983), 48 FR 45167,
45171 (Oct. 3, 1983) (approving nine applications for permanent
registration as a clearing agency).
\15\ Id.
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III. Review of Application Under Statutory Standard for Registration
Consistent with the requirements in Sections 17A and 19(a)(1) of
the Exchange Act described above, the Commission below discusses how
the Application satisfies each of the statutory requirements to be
registered as a clearing agency.\16\
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\16\ See 15 U.S.C. 78q-1(b)(3)(A)-(I) (describing the statutory
determinations that the Commission must make regarding the rules and
structure of a clearing agency to grant registration). In 1980, the
Commission published a statement of the views and positions of
Commission staff regarding the requirements of Section 17A. See
Release No. 34-16900 (June 17, 1980), 45 FR 41920 (June 23, 1980).
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A. Organization and Capacity
1. Statutory Standard: Section 17A(b)(3)(A)
Section 17A(b)(3)(A) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
such clearing agency is so organized and has the capacity to be able to
facilitate the prompt and accurate clearance and settlement of
securities transactions and derivative agreements, contracts, and
transactions for which it is responsible, to safeguard securities and
funds in its custody or control or for which it is responsible, to
comply with the provisions of the Exchange Act and the rules and
regulations thereunder, to enforce (subject to any rule or order of the
Commission pursuant to Section 17(d) or 19(g)(2) of the Exchange Act)
compliance by its participants with the rules of the clearing agency,
and to carry out the purposes of Section 17A of the Exchange Act.\17\
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\17\ 15 U.S.C. 78q-1(b)(3)(A).
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Consistent with this standard, the Commission does not assess in
this order whether ICC's ultimate implementation of the rules,
policies, and procedures set forth in its Application with respect to
the Treasury Business will comply with each of the Commission's rules
for clearing agencies, as ICC is not yet operating as a clearing agency
for its Treasury Business.\18\ Rather, the Commission assesses whether
ICC is so organized and has the capacity to comply with the provisions
of the Exchange Act and the rules and regulations thereunder,\19\ by
analyzing ICC's organization and governance, as well as its operational
arrangements.\20\ Under this standard, the registration of a clearing
agency ``depends on a prediction about compliance with the law.'' \21\
Section 17A assumes that ``an applicant would produce a business plan
that, if faithfully executed, would comply'' with the Exchange Act.\22\
To make its required statutory determination under Section
17A(b)(3)(A), the Commission must ``find[ ] that the applicant is able
and likely to comply,'' and upon registration and commencement of
operations as a registered clearing agency, compliance with Section
17A(b)(3)(A) ``is likely to be carried out.'' \23\
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\18\ See supra notes 13-14 and accompanying text (explaining
that approval of clearing agency registration does not mean that no
further modifications of the applicant's rules, systems, procedures,
or practices are needed and that the obligations of a fully
registered clearing agency cannot end after registration).
\19\ With respect to ICC's ability to safeguard securities and
funds for which it is responsible, the Commission addresses that
topic in Part III.E, in conjunction with discussing Section
17A(b)(3)(F) of the Exchange Act, which requires, among other
things, that the rules of the clearing agency are designed to assure
the safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible. With
respect to ICC's ability to enforce compliance by its participants
with the rules of the clearing agency, the Commission addresses that
topic in Part III.F in conjunction with discussing Section
17A(b)(3)(G) of the Exchange Act, which requires that the rules of
the clearing agency provide that its participants shall be
appropriately disciplined for violation of any provision of the
rules of the clearing agency.
\20\ In Part III.E, the Commission further analyzes ICC's
capacity to conduct risk management consistent with the statutory
requirements for safeguarding securities and funds set forth in
Section 17A(b)(3)(F) of the Exchange Act.
\21\ Bd. of Trade of City of Chicago v. SEC., 883 F.2d 525, 533
(7th Cir. 1989) (vacating Delta Government Options Corporation
(``Delta'')'s temporary registration as a clearing agency and
remanding to the Commission to decide whether Delta's proprietary
trading system would operate as an unregistered national securities
exchange in violation of Sections 5 and 6 of the Exchange Act).
\22\ Id. at 533-34.
\23\ Id. at 534 (emphasis in original).
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2. Summary of Proposed Operations
The following is an overview of ICC's proposed clearing agency
operations for its Treasury Business.
(a) Types of Transactions Accepted for Clearing
As described in Exhibit J, ICC will accept for clearing
transactions involving U.S. Treasury securities including (i)
transactions in repurchase and reverse repurchase agreements
collateralized by U.S. Treasury securities to which a Treasury
Participant \24\ of ICC is a counterparty, and (ii) purchases and sales
of U.S. Treasury securities (a) by a Treasury Participant of ICC
resulting from the Treasury Participant's operation of a trading
facility on which it becomes the counterparty to both the buyer and
seller for transactions executed on the platform, and (b) between a
Treasury Participant of ICC and a registered broker-dealer or a
government securities dealer or broker.\25\
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\24\ A Treasury Participant is a member of ICC participating in
the Treasury Business. More specifically, a Treasury Participant is
a person who has: (i) been approved by ICC for the submission of
transactions involving U.S. Treasury securities; (ii) entered into
an agreement with ICC specifically relating to such transactions;
and (iii) agreed to abide by ICC's rules and procedures related to
such transactions. Notice, 90 FR at 40880.
\25\ See Exhibit J of the Application, at 2.
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ICC will accept transactions directly from electronic trading
venues on which they are executed. For transactions not executed on
trading venues, such as those executed by voice, Treasury Participants
also can submit those transactions to ICC. Transactions are submitted
to ICC through ICE Link.\26\
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\26\ See id., at 8. As described in Exhibit J, ICE Link is ICC's
connectivity network and is a post-trade matching and affirmation
platform. ICE Link supports transactions executed on trading venues,
transactions executed by voice that are submitted to ICE Link for
matching and submission to clearing, bunched trades and allocations,
and customer transfers. See Exhibit J of the Application, at 8, n.3.
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According to Exhibit J, ICC accepts Trades \27\ pursuant to Rule
309 of the ICC Treasury Clearing Rules (the ``Treasury Rules'').\28\ As
described in that rule, ICC shall accept for clearance all transactions
that are submitted in accordance with, and meet the requirements
established by, ICC's rules and procedures, including implementation of
and compliance with applicable risk filters required by ICC based on
ICC's internal risk rating for the Treasury Participant and evaluation
of the risk of the Treasury Participant's existing and proposed Trades.
ICC's criteria for accepting Trades will be non-discriminatory across
trading venues.\29\ Any Trade not accepted by ICC for clearing will be
rejected. ICC will accept or reject Trades submitted for clearance
promptly after submission to ICC, and within any timeframe required
under Rule 17Ad-22 or any related regulatory interpretation.\30\
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\27\ The term ``Trades'' means transactions in contracts that
are cleared by ICC's Treasury Business. See Treasury Rule 102. The
Treasury Rules are Annex E-2 to the Application.
\28\ See Exhibit J of the Application, at 8.
\29\ See Treasury Rule 309(e).
\30\ See id.
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(b) Novation
Following acceptance by ICC in accordance with Treasury Rule 309,
the existing Trade is extinguished, and the two Treasury Participants
are deemed to have each entered into an exactly offsetting transaction
with ICC. With respect to each such Treasury
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Participant, its position in such transaction shall become an Open
Position. Trades may also be matched and submitted for the same entity,
in which case, such entity will be deemed to have entered into two
separate and distinct transactions with ICC.\31\
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\31\ See Exhibit J of the Application, at 8.
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As described in Exhibit J, ICC will require that any Trade
submitted to it for clearing be identified as either a Trade for a
Treasury Participant (a ``House Position'') or a Trade for a Non-
Participant Party for whom the Treasury Participant is clearing
transactions at ICC (a ``Client'' and a ``Client-Related
Position'').\32\ Trade submissions for Client-Related Positions will
indicate the Treasury Participant that is the clearing broker for the
Trade and the Treasury Participant that is the executing party for the
Trade. ICC will record the Client-Related Position in the relevant
Client account of the Treasury Participant acting as the clearing
broker for the Trade. If a trade submission indicates that the Treasury
Participant acting as the clearing broker is also the executing party
to the Trade, ICC will record the Treasury Participant's leg as a House
Position for that Treasury Participant. If a trade submission indicates
that a Treasury Participant is the clearing broker while a different
Treasury Participant is the executing party, ICC will (i) record the
Client-Related Position in the relevant Client account of the Treasury
Participant acting as the clearing broker for the Trade, and (ii)
record the Treasury Participant's leg as a House Position for the other
Treasury Participant acting as executing party to the Trade.\33\
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\32\ See Exhibit J of the Application, at 8-9 (describing ``done
with'' and ``done away'' trading).
\33\ See id., at 8-9.
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(c) Settlement Process
In Exhibit J, ICC describes its ability to settle transactions. For
each business day, ICC will calculate net settlement obligations for
each specific issue of Treasury security (identified by its CUSIP) for
which settlement of transactions therein is to occur on such day. A
Treasury Participant settles with ICC the net deliver/receive
obligation resulting from (i) its own House Positions and (ii) its
Client-Related Positions from its Clients that have elected to settle
with ICC through the Treasury Participant. A Client may, in
coordination with the Treasury Participant through which it clears,
elect to settle with ICC through that Treasury Participant or settle
directly with ICC.\34\ Regardless of who is settling with ICC (Treasury
Participant or Client), all securities and cash are exchanged on a
delivery-versus-payment/receive-versus-payment basis, and obligations
settle at the ICC end-of-day price, with a separate Variation Payment
to align net cashflows with the trade price.\35\
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\34\ Specifically, pursuant to Chapter 22 of the Treasury Rules,
CP House Delivery Settlement Accounts are established by Treasury
Participants for the settlement of Net Settlement Obligations in
respect of House Positions, CP Client Delivery Settlement Accounts
are established by Treasury Participants for the settlement of Net
Settlement Obligations in respect of Client-Related Positions (other
than those to be settled through Individual Client Direct Settlement
Accounts), and Individual Client Direct Settlement Accounts are
established by Non-Participant Parties of Treasury Participants for
the direct settlement of Net Settlement Obligations in respect of
Client-Related Positions in its Non-Participant Party Portfolio.
\35\ See Exhibit J of the Application, at 10-11.
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(d) Approach to Settlement Fails
Exhibit J describes the steps ICC will follow in the case of a
settlement failure. If there is a failure to deliver a Settling
Security, ICC is not required to deliver the Settling Security, and the
party that was supposed to receive the Settling Security is not
required to pay for it. The party that failed to deliver will be
required to deliver on the next ICC Settlement Day. That party also
will be obligated to pay ICC a Fail Charge in an amount determined by
ICC, and ICC will be obligated to provide a corresponding Fail Charge
payment to the party that was supposed to receive the Settling
Security. If ICC incurs any actual costs or expenses in the settlement
process from the failure to deliver a Settling Security, the party that
failed to deliver also will be obligated to reimburse ICC for any of
those charges.\36\
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\36\ See id., at 11.
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If the party set to receive a Settling Security fails to pay for
that security, ICC still may determine to accept delivery of the
Settling Security. In this case, the party that was supposed to receive
the Settling Security (but failed to pay for it) will be required to
pay ICC any losses, costs and expenses, including financing costs,
incurred by ICC in accepting the security and liquidating any security
received. Alternatively, ICC can also fully terminate the Net
Settlement Obligation and replace the Net Settlement Obligation with an
obligation to cash settle based on the price determined by ICC. Under
both circumstances, ICC can apply Initial Margin provided by the
failing party to settle any amounts owed.\37\
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\37\ See id.
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(e) Default Management
Pursuant to the Treasury Rules, upon ICC's determination that a
Treasury Participant is in Default,\38\ ICC must provide notice of the
Default, including the identity of the defaulting participant, as soon
as reasonably practicable to the other Treasury Participants and the
public.\39\ Treasury Rule 20-605(d) provides that ICC may hedge open
positions of the defaulter.\40\ ICC also may initiate the Closing-out
Process with respect to the defaulting Treasury Participant.\41\ The
Closing-out Process includes the immediate termination of all of such
defaulting Treasury Participant's Open Positions and then the
satisfaction of any Reimbursement Obligations by the defaulting
Treasury Participant, for which ICC can apply the Margin and other
assets provided by the defaulting Treasury Participant based on the
waterfall set forth in Treasury Rule 20-605(c).
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\38\ ICC may determine that a Treasury Participant is in Default
if the Treasury Participant or guarantor, among other things, (i)
fails to meet any membership obligations, (ii) is in breach of the
terms of membership or is suspended, or (iii) is terminated,
suspended or has certain clearing privileges revoked pursuant to
Treasury Rule 615(b). See Exhibit J of the Application, at 6.
\39\ Treasury Rule 20-605(b).
\40\ Treasury Rule 20-605(d).
\41\ Treasury Rule 20-605(a). As defined in Treasury Rule 102,
``Closing-out Process'' means, in connection with the Default of a
Treasury Participant, the process of termination of Open Positions,
determination of amounts owing with respect thereto, netting of such
amounts, liquidation and application of any Margin and/or
Collateral, and application of Post-Default Portability Rules
pursuant to Treasury Rule 20A-02, if applicable.
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Regarding margin, ICC will collect Initial Margin for both House
Positions and Client-Related Positions. As described in Exhibit J, and
as further set out in Treasury Rule 401(b), each Treasury Participant
is responsible for ensuring that Margin is met for its Client-Related
Positions and transferring to ICC cash or other collateral needed to
meet such Margin requirement. Clients may choose between net or gross
margin position accounts, as described further in Exhibit J.\42\ These
accounts allow a Client to choose whether to fund all, some, or none of
its Margin requirement. ICC will maintain Client-funded Client Margin
in separate, legally segregated, margin accounts from House-funded
Client Margin or House
[[Page 5531]]
Margin. Finally, ICC will determine Margin for each Treasury
Participant in respect to its House Positions and in respect of any
applicable Client-Related Positions, following the close of business on
each ICE Business Day, based on 99% Value-at-Risk equivalent risk
measures with additional liquidity and concentration requirements.\43\
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\42\ Specifically, depending on the agreement between the
Treasury Participant and its related Non-Participant parties, margin
or collateral associated with the relevant Client-Related Positions
may be held in one of four different type of accounts: (i) Client-
Funded Gross IM Accounts, (ii) Clearing Participant-Funded Gross IM
Accounts, (iii) Hybrid Gross IM Accounts, and (iv) Net Client IM
Accounts.
\43\ See Exhibit J of the Application, at 3.
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With respect to safeguarding securities and funds in its custody or
control or for which it is responsible, as described in Exhibit L, ICC
safeguards its own assets, and the assets of Treasury Participants and
their Clients. ICC does so by using only approved settlement banks,
custodians, and other financial service providers that ICC has chosen
based on their ability to provide the services required by ICC,
creditworthiness, relevant experience and operational stability. ICC
conducts due diligence reviews to assess whether its settlement banks
and custodians employ adequate accounting practices, safekeeping
procedures and internal controls that protect deposits, ensure full
segregation and protection of financial instruments, and allow ICC
prompt access to assets when required. In addition, ICC monitors the
financial health of the financial institutions in which it holds its
settlement and custodial accounts on an on-going basis, with an
emphasis on measures related to liquidity and cash management.\44\
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\44\ See Exhibit L of the Application, at 1.
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With respect to U.S. Dollar and U.S. Treasury securities collateral
posted by participants in the CDS Business, to the fullest extent
available, ICC holds such cash and U.S. Treasury securities at its
accounts with the Federal Reserve Bank of Chicago.\45\ For the Treasury
Business, ICC will use four different accounts to legally segregate
House collateral, Client-related collateral, and variation payments.
ICC will hold collateral either in a bank deposit at a commercial bank
or invest the collateral using reverse repurchase agreements backed by
certain U.S. Treasury securities.
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\45\ See id.
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(f) Business Continuity Practices
In Exhibit K, ICC describes how it provides for the security of the
systems that ICC uses to perform the functions of a clearing agency.
ICC does this through the application of the Corporate Information
Security Policy (``CISP''). The CISP describes the information security
policies for the creation, transfer and storage of sensitive data
applicable to all users at ICC. The CISP covers areas such as access to
data; remote access to networks; protection of data; network security;
and security testing.\46\
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\46\ See Exhibit K of the Application, at 1. ICC submitted the
CISP as a confidential annex to the Application.
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In addition to information security, ICC also provides for business
continuity and disaster recovery. Moreover, ICC states that it has a
comprehensive business continuity and disaster recovery program that
supports the continued performance of critical functions in the event
ICC's headquarters or primary data center is unavailable due to
significant business interruption.\47\ Maintaining the continued
performance of critical functions in the event ICC's headquarters or
primary data center is unavailable due to significant business
interruption, should help ensure that ICC is able to facilitate the
prompt and accurate clearance and settlement of securities transactions
even during the loss of its headquarters or primary data center.\48\
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\47\ ICC describes its business continuity and disaster recovery
program in its Disclosure Framework, as it relates to ICC's
operation as a whole. The Disclosure Framework is consistent with,
and provides public facing information related to, the contents of
Exhibit K of the Application. See ICC Disclosure Framework,
Principle 17, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a> (``The business continuity/
disaster recovery program has six objectives: (i) ensure continuity
and recovery of critical functions through its secondary/disaster
recovery facility; (ii) minimize the disruption to clients and
business partners; (iii) protect the firm's books and records; (iv)
reduce the number and frequency of ad hoc decisions following a
significant business interruption; (v) educate employees about
contingency plans and roles and responsibilities in executing the
plans; and (vi) comply with regulatory requirements. As part of the
business continuity and disaster recovery program, ICC maintains a
detailed Business Continuity Plan (`BCP'). The BCP outlines ICC's
strategy to resume clearing operations within two hours following:
(i) loss of key personnel or reduction of available staff; (ii) loss
of primary work facility; (iii) loss of primary data center; and
(iv) a widescale disruption affecting staff, data and facilities.
ICC conducts regular BCP and disaster recovery testing and requires
CP participation at least annually.'').
\48\ See ICC Disclosure Framework, Principle 17, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
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3. Organization, Governance, and Analysis
ICC is a Delaware limited liability company, which is wholly owned
by ICE US Holding Company, L.P. (``Parent'').\49\ While Parent is ICC's
direct shareholder, ICC's ultimate parent company is Intercontinental
Exchange, Inc. (``ICE''). Under this structure, ICC's ultimate parent
company, ICE, provides services to ICC, such as services related to
IT.\50\ ICC is managed by a Board of Managers (``Board'') consisting of
nine members,\51\ along with specialized committees of the Board,
including the ICC Audit Committee, ICC Nominating Committee, and ICC
Risk Committee.\52\ Each Board committee has a written charter that
lays out the membership structure and responsibilities of that
committee.\53\
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\49\ See Exhibit C of the Application.
\50\ See Exhibit K of the Application, at 1 (stating that ``ICE
operates various systems on behalf of its regulated subsidiaries'');
Exhibit I of the Application (``ICC receives certain clearing
services from ICE under the Administrative Services Agreement dated
July 1, 2025 by and between Intercontinental Exchange Holdings, Inc.
and ICC and the Amended and Restated Clearing Settlement Services
Agreement dated October 15, 2018 by and between Intercontinental
Exchange Holdings, Inc. and ICC'').
\51\ See Exhibit B of the Application.
\52\ See Exhibit C of the Application.
\53\ ICC submitted these charters as confidential annexes to the
Application.
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As noted, ICC intends to conduct the Treasury Business within the
same legal entity--ICC--that is currently conducting ICC's existing CDS
Business. Accordingly, ICC's existing organization, governance, and
disclosure framework for the CDS Business will also apply to the
Treasury Business. With respect to organization and governance, ICC is
a Delaware limited liability company.\54\ As described above and in
Exhibit A of the Application, the Parent, ICE, ICC's Board of Managers,
CDS Risk Committee, Treasury Risk Committee, and executives, are the
persons who will direct the management and policies of ICC, including
in connection with the Treasury Business.\55\ The ICC Board has full
responsibility for the operations of ICC and approves ICC's initiatives
without any requirements for approval from Parent or ICE.\56\ Moreover,
at least a majority of ICC's Board consists of independent
directors.\57\
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\54\ See Exhibit C of the Application.
\55\ See Exhibit A of the Application. As noted in Exhibit A,
the CDS Risk Committee and the Treasury Risk Committee each have
certain consultation rights as set forth in Rule 502 of the CDS Rule
Book and Rule 502 of the Treasury Rule Book.
\56\ See ICC Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>. As part of the Application,
ICC also submitted confidentially the relevant Board committee
charters, which are consistent with the ICC Disclosure Framework.
\57\ See id.
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In addition to the Board, ICC's Board committees and non-Board
committees are also involved in ICC's governance and risk management.
For example, the ICC Board Risk Committee is a Board level committee
that assists the ICC Board in fulfilling its oversight responsibilities
with respect to risk management of ICC.\58\ In particular, the
[[Page 5532]]
ICC Board Risk Committee oversees (i) risk management models, systems,
and processes used to identify and manage systemic, market, credit, and
liquidity risks at ICC and (ii) matters that could materially affect
the risk profile of ICC. The ICC Board Risk Committee consists of at
least five Board members, a majority of which meet ICC's independence
requirements, and includes Board members that are representatives of
ICC's Clearing Participants.\59\ The ICC Nominating Committee assists
the Board in (i) identifying and attracting highly qualified
individuals to serve as Board members; (ii) evaluating the individuals
nominated to the Board by the non-Board risk committees; and (iii)
evaluating and providing recommendations to the Board on whether Board
members qualify as independent under ICC's Independence
Requirements.\60\ Finally, the ICC Audit Committee provides the Board
with an independent opinion and makes recommendations on matters of
importance to ICC's financial condition; financial information,
policies, practices, systems and controls; legal and regulatory
compliance relating to financial matters; and business ethics.\61\
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\58\ See id.
\59\ See id.
\60\ The ICC Nominating Committee consists of at least three
Board members, a majority of whom meet ICC's independence
requirements. See ICC Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
\61\ The ICC Audit Committee consists of at least three Board
members, all of whom meet ICC's independence requirements. See ICC
Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
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Moreover, ICC's non-Board level risk committees are also involved
in ICC's governance and risk management. The Treasury Rules establish a
Treasury Risk Committee, which includes representatives from Treasury
Participants and non-participants. Pursuant to Treasury Rule 502, ICC
shall not take, or permit to be taken, certain actions without
consulting the Treasury Risk Committee. Such actions include, among
other things, modifying the Treasury Rules with respect to clearing new
or existing Contracts, modifying provisions related to margin, and
modifying provisions related to the Treasury Guaranty Fund.\62\
Finally, pursuant to Treasury Rule 508(a), effective as of the Treasury
Governance Commencement Date, the Treasury Risk Committee will have
authority to designate to ICC's Parent two members for election to the
Board.\63\
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\62\ See Treasury Rule 502.
\63\ See Treasury Rule 508(a). One of the persons selected must
satisfy ICC's Independence Requirements. The ``Treasury Governance
Commencement Date'' is defined in ICC's Operating Agreement. It
means the date of the first annual Board election occurring after
the Treasury Business accounts for a specified percentage of ICC's
revenue and ICC has obtained a specified percentage of the overall
market share for Treasury clearing. Specifically, it is the date of
the first annual election of managers that occurs after the first
two consecutive calendar quarters following June 30, 2026, in which
(a) the aggregate transaction-based revenue of the Treasury Business
in each quarter is at least twenty percent (20%) of the aggregate
transaction-based revenue of ICC in such quarter and (b) the
arithmetic average of (i) the Treasury Clearing Market Share for the
first such calendar quarter and (ii) the Treasury Clearing Market
Share for the second such calendar quarter is greater than or equal
to ten percent (10%).Treasury Clearing Market Share means, for a
specified period, a fraction (expressed as a percentage), the
numerator of which is the publicly reported aggregate notional value
of transactions involving U.S. Treasury securities cleared by ICC in
such period, and the denominator of which is the publicly reported
aggregate notional value of transactions involving U.S. Treasury
securities cleared by all Treasury CCPs in such period. After the
Treasury Governance Commencement Date, the Treasury Risk Committee
will designate two managers for election to the Board, including an
independent manager. ICC's existing CDS Risk Committee, which
includes representatives from Participants and non-participants,
currently designates four managers for election to the Board. After
the Treasury Governance Commencement Date, the overall number of
managers designated by ICC participants and non-participants will
remain at four (of nine), with the selection split between the two
non-Board risk committees.
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Use of the ICC Board Risk Committee and non-Board risk committees
supports ICC's Application meeting the statutory standard in Section
17A(b)(3)(A). Such committees will help ensure that ICC has the
capacity to be able to facilitate the prompt and accurate clearance and
settlement of securities transactions because the committees will help
identify and manage risks that, if not properly managed, could impede
ICC's ability to clear transactions. Moreover, the other Board
committees mentioned above--Audit and Nominating have distinguishable
areas of focus and are designed to operate within the larger corporate
framework, which is another way that ICC meets the statutory standard
in Section 17A(b)(3)(A) and complies with the Exchange Act and rules
and regulations thereunder.\64\
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\64\ See supra note 11 (summarizing the Commission rules
applicable to registered clearing agencies).
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ICC's governance arrangements include a process for classifying
certain directors as independent. Five members of the Board are
appointed by the Parent, and three of those are required to be
independent.\65\ An additional four members of the Board are currently
nominated by the CDS Risk Committee, and two of those are required to
be independent.\66\ As described above, after the Treasury Governance
Commencement Date, the Treasury Risk Committee will nominate two of
these managers. The ICC Nominating Committee evaluates and recommends
to the Board if each Manager, and any nominee for Manager, qualifies as
independent under ICC's Independence Standards.\67\ These independence
standards are intended to be consistent with the NYSE Listing
Standards, ICE's Board of Director Governance Principles, and the
applicable provisions and rules of the Exchange Act.\68\ Independent
directors help promote the ability of the Board to perform its
oversight of management function at ICC and support a plurality of
viewpoints voiced at the Board level,\69\ which should help ensure the
effective management of ICC and that ICC is so organized and has the
capacity to be able to facilitate the prompt and accurate clearance and
settlement of securities transactions, consistent with Section
17A(b)(3)(A).
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\65\ See ICC Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
\66\ See ICC Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
\67\ See id.; see also Self-Regulatory Organizations; ICE Clear
Credit LLC; Notice of Filing and Order Granting Accelerated Approval
of Proposed Rule Change Relating to the Governance Playbook and
Seventh Amended and Restated Operating Agreement, Release No. 34-
101820 (Dec. 5, 2024), 89 FR 99917 (Dec. 11, 2024) (SR-ICC-2024-
010).
\68\ See ICC Disclosure Framework, Principle 2, <a href="https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf">https://www.ice.com/publicdocs/clear_credit/ICEClearCredit_DisclosureFramework.pdf</a>.
\69\ See Clearing Agency Governance and Conflicts of Interest,
Release No. 34-98959 (Nov. 16, 2023), 88 FR 84454, 84457 (Dec. 5,
2023) (``Clearing Agency Governance Release'') (``requiring a
certain percentage of independent directors helps promote the
ability of the board to perform its oversight of management function
and to support a plurality of viewpoints voiced at the board
level.'').
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With respect to its operational arrangements and capacity to
facilitate prompt and accurate clearance and settlement, as generally
described in Part III.A.2 above, ICC's systems and processes will
enable trade submission, matching, novation, netting, settlement and
settlement fails management, and promote data security and business
continuity. ICC's rules, policies and procedures include governance
processes that support and oversee these clearing agency operations.
These governance processes demonstrate that ICC is so organized and has
the capacity to facilitate prompt and accurate clearance and settlement
and to comply with the Exchange Act and rules and regulations
thereunder. For example, the ICC Chief Compliance Officer has an
[[Page 5533]]
additional reporting line to the Board of Managers, and the ICC Chief
Risk Officer has an additional reporting line to the Chairperson of the
ICC Treasury Risk Committee.\70\ These elements of the Application
demonstrate that ICC will have multiple reporting channels for the
oversight of legal and regulatory compliance.
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\70\ See Exhibit C of the Application, at 1.
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Additionally, as described above and in Exhibit L of the
Application, ICC has in place safeguards for its own assets, and the
assets of Treasury Participants and their Clients.\71\ For example, ICC
uses only approved settlement banks, custodians, and other financial
service providers that ICC has chosen based on their ability to provide
the services required by ICC, creditworthiness, relevant experience,
and operational stability. ICC conducts due diligence on these service
providers and monitors their financial health on an on-going basis.
Moreover, ICC currently holds cash and U.S. Treasury securities from
its CDS Business at its accounts with the Federal Reserve Bank of
Chicago. For the Treasury Business, ICC will use four different
accounts to legally segregate house collateral, client-related
collateral, and variation payments. These practices demonstrate that
ICC is so organized and has the capacity to safeguard securities and
funds in its custody or control or for which it is responsible.
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\71\ See Exhibit L of the Application, at 1.
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Finally, the ICC Chief Compliance Officer has an additional
reporting line directly to the ICC Board, and the ICC Chief Risk
Officer has an additional reporting line directly to the Chairperson of
the ICC Risk Committee, who also is a non-executive manager on the ICC
Board.\72\ Having multiple personnel, layers of review and reporting,
and the ability to access additional resources in order to proactively
manage its risks is one way ICC demonstrates it is so organized and has
the capacity to comply with the provisions of the Exchange Act and the
rules and regulations thereunder.\73\
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\72\ See Exhibit C of the Application.
\73\ See supra note 11 (summarizing the Commission rules
applicable to registered clearing agencies and the Commission's
tools for the supervision and examination of registered clearing
agencies).
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For the reasons discussed above, the Commission determines that ICC
is so organized and has the capacity to be able to facilitate the
prompt and accurate clearance and settlement of securities
transactions, to safeguard securities and funds in its custody or
control or for which it is responsible, and to comply with the
provisions of the Exchange Act and the rules and regulations
thereunder.
B. Participation Standards
1. Statutory Standard and Analysis: Section 17A(b)(3)(B)
Section 17A(b)(3)(B) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the clearing agency provide that any (i) registered broker
or dealer, (ii) other registered clearing agency, (iii) registered
investment company, (iv) bank, (v) insurance company, or (vi) other
person or class of persons as the Commission, by rule, may from time to
time designate as appropriate to the development of a national system
or the prompt and accurate clearance and settlement of securities
transactions may become a participant in such clearing agency.\74\
Section 3(a)(24) of the Exchange Act defines a ``participant'' with
respect to a clearing agency as any person who uses a clearing agency
to clear or settle securities transactions or to transfer, pledge,
lend, or hypothecate securities, and further states that the term does
not include a person whose only use of a clearing agency is (i) through
another person who is a participant or (ii) as a pledgee of
securities.\75\
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\74\ Section 17A(b)(3)(B) of the Exchange Act also states that
the rules of the clearing agency are subject to the provisions of
Section 17A(b)(4) of the Exchange Act.
\75\ 15 U.S.C. 78c(a)(24).
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Treasury Rule 102 defines Treasury Participant as a person that has
been approved by ICC for the submission of Contracts in the Treasury
Clearing Service and that is party to an agreement with ICC
specifically relating to transactions in such Contracts. Treasury Rule
201(b) states that Treasury Participants must meet and maintain such
standards of business integrity, financial capacity, creditworthiness,
operational capability, experience and competence as may be established
by ICE Clear Credit from time to time and that no person shall be
admitted as a Treasury Participant or be permitted to remain as a
Treasury Participant unless, in ICC's determination, the person meets
the standards set out in Treasury Rule 201(b). Treasury Rule 201(c)
further states that, for the avoidance of doubt, and without limiting
Treasury Rule 201(b), the following categories of persons may be
approved by ICC as Treasury Participants, provided that such applicant
meets and maintains the applicable standards for participation set
forth in Treasury Rule 201(b): (i) registered broker-dealer; (ii)
registered investment company; (iii) bank; (iv) insurance company; or
(v) such other person or class of persons that the SEC may designate as
appropriate.\76\ The Treasury Rules distinguish a Treasury Participant
from a Non-Participant Party, which is defined as a person that is not
ICC or a Treasury Participant.\77\ Non-Participant Parties may include,
without limitation, an Affiliate of a Participant.\78\
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\76\ Treasury Rule 201(c). See Annex E-2 of the Application.
Treasury Rule 201(c) is identical to ICC's existing CDS Rule 201(c).
\77\ Treasury Rule 102.
\78\ Id.
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The Commission finds that Treasury Rule 201 provides for all the
categories of persons listed in Section 17A(b)(3)(B), including
clearing agencies, to become participants. Treasury Rules 201(a) and
201(b) do not limit the type of person who can become a Treasury
Participant, as long as that person meets ICC's standards.\79\ While
the categories of persons listed in part (c) of Treasury Rule 201 do
not explicitly include clearing agencies, it is clear from the rule
itself that the list is not intended to be exclusive, as it states,
``without limiting Section 201(b).'' Consistent with this reading of
Treasury Rule 201, ICE Clear Credit stated in its letter that Treasury
Rule 201(c) ``is a non-exclusive list of the types of entities that ICC
may approve as a Treasury Participants (provided that they meet and
maintain the ICC participation standards set out in Treasury Rule
201(b)).'' \80\ Because Rule 201(c) does not limit Rule 201(b), and
because Rule 201(b) does not limit the type of person that may become a
Treasury Participant, registered clearing agencies could become
Treasury Participants, and accordingly, the Commission finds that the
Application satisfies the requirements of Section 17A(b)(3)(B) of the
Exchange Act.
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\79\ Treasury Rule 201(a) provides that ICC ``shall determine
whether any applicant for status as a Treasury Participant, or any
existing Treasury Participant, satisfies the qualifications
established by'' ICC and only those persons found by ICC ``to be so
qualified shall be permitted to become or remain, as applicable,
Treasury Participants.'' Treasury Rule 201(b) sets out certain
standards that an applicant for admission as Treasury Participant,
and any existing Treasury Participant on an ongoing basis, must
satisfy. Among other things, Treasury Participants and applicants
must maintain a minimum of $50 million of Adjusted Net Capital and
demonstrate to the ICC Board of Managers, upon recommendation by ICC
senior management, that such person seeking to be a Treasury
Participant satisfies the stringent credit criteria established by
the ICC Board of Managers. See infra Section III.B.2 for a
discussion of ICE Clear Credit's membership standards.
\80\ See letter from Stanislav Ivanov, ICC, dated Dec. 3, 2025
(``ICC Response Letter''), at 3.
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One commenter recommended that ICC explicitly permit Futures
[[Page 5534]]
Commission Merchants (``FCMs'') to become Treasury Participants or Non-
Participant Parties and adjust its rules to accommodate FCMs'
participation.\81\ In response, ICC explained that Treasury Rule 201(c)
is non-exclusive, and ICC may accept FCMs as Treasury Participants
provided that they meet and maintain the ICC participation standards
set out in Treasury Rule 201(b).\82\ With respect to adjusting the
Treasury Rules to accommodate FCMs, ICC stated that certain of the
inconsistencies between the Treasury Rules and the CFTC Rules are
outside the control of ICC.\83\
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\81\ See letter from Allison Lurton, FIA, dated Oct. 6, 2025
(``FIA''), at 3-5. This commenter suggested, among other things,
that ICC adjust certain of its rules to accommodate FCMs' clearing
of repurchase transactions involving customer funds pursuant to
rules of the Commodity Futures Trading Commission (``CFTC''). For
example, the commenter noted that ICC's requirement to submit for
clearing all Trades in furtherance of Rule 17Ad-22(e)(18)(iv) could
be inconsistent with an existing CFTC rule that permits an FCM to
enter into a repurchase transaction involving customer funds only
with certain permitted counterparties, not including SEC-registered
clearing agencies.
\82\ See ICC Response Letter at 3.
\83\ Id.
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FCMs are not one of the types of persons listed in Section
17A(b)(3)(B) of the Exchange Act, nor has the Commission, by rule,
designated that FCMs may become participants in a clearing agency.
These suggestions therefore pertain to certain choices ICC has made in
designing its clearing agency but do not bear on whether ICC's
Application is consistent with a specific Commission rule, or whether
ICC's Application more generally meets the standard for registration.
However, the Commission understands that Treasury Rule 201(b) would
allow an FCM to join ICC, if it meets the participation standards set
out in Rule 201(b), just as a clearing agency would be able to do
so.\84\ In addition, the Treasury Rules do not prohibit an FCM (or any
other type of entity) from being a Non-Participant Party. Therefore,
the commenter's request for an explicit acknowledgement in the Treasury
Rules that FCMs may join is unnecessary.
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\84\ See id.
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Another commenter proposed clarifications to the Treasury Rules
related to registered investment companies.\85\ The commenter suggested
these clarifications would help ICC obtain potential no-action relief
and that such no-action relief, if granted, would facilitate the
participation of registered investment companies.\86\ In response, ICC
stated that it appreciated the proposed clarifications and will
continue to work with market participants, particularly on matters
affecting Treasury Participants or Clients that are registered
investment companies.\87\
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\85\ See letter from Robert Toomey, SIFMA, William C. Thum,
SIFMA Asset Management Group, and Tara R. Buckley, Investment
Company Institute, dated Oct. 6, 2025 (``SIFMA & AMG''), at 6-9.
\86\ Id. at 6-9 (noting that in the adopting release to Rule
17Ad-22(e)(18)(iv) ``the SEC granted no-action relief stating that
`if a registered investment fund's cash and/or securities are placed
and maintained in the custody of FICC for purposes of meeting FICC's
margin deposit requirements that may be imposed for eligible
secondary market transactions in connection with the fund's
participation in the Sponsored Program, it would not provide a basis
for enforcement action under Section 17(f) of the 1940 Act so long
as [certain criteria are met]' '').
\87\ ICC Response Letter at 7.
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Section 17A(b)(3)(B) of the Exchange Act does not specify how
registered investment companies' participation should be facilitated.
The clarifications sought by the commenter pertain to certain choices
ICC has made in designing its clearing agency and do not bear on
whether ICC's Application is consistent with a specific Commission
rule, or whether ICC's Application more generally meets the standard
for registration.
For these reasons, the Commission finds that the Application
satisfies the requirements of Section 17A(b)(3)(B) of the Exchange Act.
2. Statutory Standard and Analysis: Section 17A(b)(4)(B)
Section 17A(b)(4)(B) of the Exchange Act states that a registered
clearing agency may deny participation to, or condition the
participation of, any person if such person does not meet such
standards of financial responsibility, operational capability,
experience, and competence as are prescribed by the rules of the
clearing agency. Section 17A(b)(4)(B) also provides that a registered
clearing agency may examine and verify the qualifications of an
applicant to be a participant in accordance with procedures established
by the rules of the clearing agency.
With respect to the criteria for participation under Section
17A(b)(4)(B) of the Exchange Act, the Application describes how ICC
requires that all Treasury Participants meet and maintain standards of
business integrity, financial responsibility, creditworthiness,
operational capability, experience and competence.\88\ Among other
things, Treasury Participants must: maintain a minimum of $50 million
of Adjusted Net Capital; \89\ demonstrate to the ICC Board of Managers,
upon recommendation by ICC senior management, that such person seeking
to be a Treasury Participant satisfies the stringent credit criteria
established by the ICC Board of Managers; demonstrate sufficient
financial ability to make its anticipated Treasury Guaranty Fund
Contributions and provide Margin as required by the Treasury Rules;
demonstrate risk management competence; and participate in default
management simulations, technology testing, and other exercises as
notified by ICC from time to time.\90\
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\88\ See Exhibit O of the Application.
\89\ For the purposes of Treasury Rule 201(b)(i), Adjusted Net
Capital means (i) for a Treasury Participant that is a Broker-
Dealer, its net capital as defined in Rule 15c3-1 and as reported on
its FOCUS Report and (ii) for a Treasury Participant that is not a
Broker-Dealer, the amount of its net capital as determined pursuant
to a similar risk adjusted capital calculation methodology
acceptable to ICC.
\90\ See Exhibit O of the Application; Treasury Rule 201(b).
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In making the determination as to whether a person meets the
qualifications to become a Treasury Participant and maintains these
standards, ICC reserves the right to examine the books and records of
any applicant or Treasury Participant.\91\ Such an examination may be
performed onsite at the applicant or Treasury Participant, during
normal business hours, and with reasonable advance notice.\92\ In the
case of a Treasury Participant, such an examination would be performed
not more frequently than annually, unless ICC determines that a more
frequent examination of the Treasury Participant is appropriate for the
protection of the clearing system operated by ICC pursuant to the
Treasury Clearing Rules.\93\
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\91\ ICC Treasury Clearing Rule 201(a).
\92\ Id.
\93\ Id.
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Pursuant to Treasury Rule 203, ICC may suspend or revoke any
Treasury Participant's clearing privileges for failure to comply with
the Treasury Rules or may impose additional capital, Margin, Trade, and
Contract restrictions on a Treasury Participant to protect ICC and the
other Treasury Participants. Its rules provide that ICC has the
authority to deny participant status to entities that are subject to a
statutory disqualification under Section 3(a)(39) of the Exchange Act
\94\ or revoke participant status of entities that become subject to
such a statutory disqualification.\95\
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\94\ 15 U.S.C. 78c(a)(39).
\95\ See Exhibit O of the Application, at 1; Treasury Rules 201
and 207.
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ICC uses a due diligence process to ensure that all applicants meet
the required criteria for participation and conducts on-going
monitoring of
[[Page 5535]]
participants.\96\ In this regard, ICC requires Treasury Participants to
submit statements of financial condition at such times and in such
manner as prescribed by ICC and requires each Treasury Participant that
is a Broker-Dealer to provide ICC a copy of its FOCUS Reports, as and
when filed with the Financial Industry Regulatory Authority.\97\ ICC
further requires Treasury Participants to notify ICC immediately in
writing of certain events, such as a material adverse change in a
Treasury Participant's financial condition or any proposed material
reduction in a Treasury Participant's operating capital.\98\ If ICC
determines a Treasury Participant is in danger of not meeting the
requirements or otherwise poses an unacceptable level of risk to ICC or
other participants of the Treasury Business, as applicable, ICC may
take action to limit ICC's exposure, including an increase in initial
margin requirements, reduction of participant positions, or reduction
of the concentration thresholds applicable to the participant.\99\ ICC
also may, in the event a Treasury Participant fails to comply with the
Treasury Rules or procedures, suspend or revoke the Treasury
Participant's clearing privileges and impose additional capital,
margin, or other requirements on a Treasury Participant.\100\ Finally,
where a Treasury Participant commits a material breach of the Treasury
Rules or any of the terms or provisions of any agreement between ICC
and the Treasury Participant, which is not remedied promptly after
notice from ICC, ICC may impose limitations, conditions, and
restrictions upon a Treasury Participant or, subject to the
requirements of Treasury Rule 615(b), terminate the status of the
Treasury Participant.\101\
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\96\ See Exhibit O of the Application, at 1; Treasury Rule
201(a).
\97\ Treasury Rule 204. The rule further provides that any
Treasury Participant that is not a Broker-Dealer shall provide to
ICC a copy of such forms as ICC may determine to be necessary on a
comparable schedule to that which a Broker-Dealer would be required
to follow in filing such forms with the Financial Industry
Regulatory Authority.
\98\ Treasury Rule 206.
\99\ See Exhibit O of the Application; Treasury Rules 203, 207,
and 209.
\100\ Treasury Rule 203.
\101\ Treasury Rule 207.
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Commenters recommended that ICC establish ``more specific capital
requirements on applicants who wish to become Treasury Participants,
depending on their entity type'' \102\ and adjust the capital
requirements ``based on the activity of the Participant.'' \103\ ICC
stated in its response that the membership requirements are the same
for all applicants and include fitness criteria, financial standards,
and operational standards, which ICC states are appropriate and
specific enough for potential applicants.\104\
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\102\ FIA at 5; see also SIFMA & AMG at 11-12;letter from
Katherine Darras, International Swaps and Derivatives Association,
dated Oct. 6, 2025 (``ISDA''), at 2.
\103\ SIFMA & AMG at 11-12.
\104\ ICC Response Letter at 3.
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While Section 17A(b)(4)(B) of the Exchange Act provides that ICC
may deny participation to, or condition the participation of, any
person if such person does not meet such standards of financial
responsibility as ICC may establish, it does not set out any minimum
capital requirement that a participant must satisfy, nor does it
specify certain requirements regarding financial responsibility for
each type of Treasury Participant or require these standards be
adjusted based on a Treasury Participant's activities.
Section 17A(b)(4)(B) of the Exchange Act therefore does not require
a registered clearing agency to establish capital standards specific to
each type of participant or to adjust capital standards in response to
the level of a participant's activity. ICC's Treasury Rules give ICC
the ability to establish more specific standards, however, if ICC
determines they are needed.\105\ As stated above, for the protection of
ICC and other Treasury Participants, ICC can impose additional capital,
margin, or other requirements on a Treasury Participant.\106\ Moreover,
ICC conducts on-going monitoring of Treasury Participants, including
obtaining statements of financial position. Therefore, pursuant to its
Treasury Rules ICC could, if needed for the protection of ICC and
Treasury Participants, adjust capital requirements,\107\ as recommended
by commenters.
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\105\ Treasury Rule 203(b) (``In addition to any other rights
granted to ICE Clear Credit under these Rules, for the protection of
ICE Clear Credit and the Treasury Participants, ICE Clear Credit
shall be authorized: (i) to impose such additional capital, Margin
or other requirements on a Treasury Participant; (ii) to allow such
Treasury Participant to submit Trades for liquidation only; (iii) to
limit or restrict the type of Contracts that may be cleared by such
Treasury Participant in any of its accounts with ICE Clear Credit;
or (iv) to limit or restrict the aggregate notional or other
reference amount of positions in Contracts that are permitted to be
maintained by such Treasury Participant in any of its accounts with
ICE Clear Credit in the Treasury Clearing Service . . . .'').
\106\ Treasury Rule 203. Per Treasury Rule 203(a), ICC may only
suspend or revoke a Treasury Participant's clearing privileges
subject to the requirements of Treasury Rule 615(b). That rule
imposes certain procedural requirements, including consultation with
ICC's regulators and consent of the Board.
\107\ As noted above, ICC was deemed registered with the
Commission as a clearing agency in 2011 solely for the purpose of
clearing security-based swaps. Since that time, ICC has been
operating its CDS Business and acting as a CCP for CDS. As a CCP for
CDS, ICC is subject to Rule 17Ad-22(b)(7). That rule requires that
ICC establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide a person that maintains
net capital equal to or greater than $50 million with the ability to
obtain membership. Rule 17Ad-22(b)(7) allows ICC to provide for a
higher net capital requirement as a condition for membership if ICC
demonstrates to the Commission that such a requirement is necessary
to mitigate risks that could not otherwise be effectively managed by
other measures and the Commission approves the higher net capital
requirement as part of a rule filing or clearing agency registration
application. Thus, if ICC were to establish more specific capital
requirements on applicants who wish to become Treasury Participants,
as suggested by commenters, ICC would need to do so in compliance
with Rule 17Ad-22(b)(7).
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Because the Treasury Rules would establish robust financial
standards and operational competency standards for Treasury
Participants that clearly denote ongoing compliance obligations and set
forth consequences for failing to meet those obligations, the Treasury
Rules are sufficient to protect the clearing agency from the risks that
can be associated with Treasury Participants who would not otherwise
meet such competency standards.
For the reasons discussed above, the Commission determines that the
rules of ICC regarding participation in the clearing agency are
consistent with the standards set forth in Section 17A(b)(4)(B) of the
Exchange Act.
C. Fair Representation
1. Statutory Standard: Section 17A(b)(3)(C)
Section 17A(b)(3)(C) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the clearing agency assure a fair representation of its
shareholders (or members) and participants in the selection of its
directors and administration of its affairs.\108\
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\108\ Section 17A(b)(3)(C) of the Exchange Act also states that
the Commission may determine that the representation of participants
is fair if they are afforded a reasonable opportunity to acquire
voting stock of the clearing agency, directly or indirectly, in
reasonable proportion to their use of such clearing agency.
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2. Summary of Application and Analysis
Under Section 17A(b)(3)(C) of the Exchange Act, the Commission
considers whether the Application provides fair representation both to
shareholders and to participants in the selection of directors and the
administration of affairs. In doing so, the Commission undertakes an
analysis of the documents in the Application that govern or otherwise
affect the selection of directors by the clearing
[[Page 5536]]
agency and the administration of its affairs. Such documents include,
for example, the constitution, articles of incorporation, bylaws,
rules, and written policies or procedures. Such analysis considers both
qualitative and quantitative factors, including the number of board
positions reserved for management or to represent participants, as well
as the existence of provisions in governing documents that may impede
participation in the selection of directors or the administration of
affairs. The Commission also considers the overall organization of the
clearing agency, the nature of the products it clears, and the
structure of the market it serves, including the nature of existing
clearing and settlement arrangements in the market served, the
existence of other clearing agencies that would compete to offer
services, and the size of the market served by the applicant, to
evaluate whether the representation proposed by the applicant is
consistent with the requirements of the Exchange Act.\109\ Finally,
because ICC will operate the Treasury Business in the same existing
legal entity where it operates the CDS Business, the Commission
considers ICC's existing arrangements that affect its CDS Business, to
the extent they indicate whether ICC, as an entity, would provide fair
representation to shareholders and participants of its Treasury
Business.
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\109\ Accordingly, the level of participant representation
needed to ensure fair representation consistent with the Exchange
Act may vary depending on the facts and circumstances, including the
market or markets to which the application is directed.
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After performing this analysis, the Commission finds that the
Application provides fair representation for the reasons set forth
below.
With respect to the fair representation of the shareholders in the
selection of its directors and administration of its affairs, ICC's
Parent may elect up to five members of ICC's Board of Managers, which
consists of nine members total.\110\ Subject to the consultation rights
of the CDS Risk Committee and Treasury Risk Committee, the management
of the affairs of ICC is vested exclusively in the Board of Managers.
Taken as a whole, these provisions assure a fair representation of the
shareholders of ICC in the selection of its directors and
administration of its affairs.
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\110\ See Self-Regulatory Organizations; ICE Clear Credit LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Governance Playbook and Seventh Amended
and Restated Operating Agreement, Release No. 34-101820 (Dec. 5,
2024), 89 FR 99917 (Dec. 11, 2024) (File No. SR-ICC-2024-010).
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With respect to fair representation of the participants of ICC in
the selection of its directors and administration of its affairs, ICC's
Parent is the sole shareholder of ICC, and the Application includes no
provision to make ICC voting stock available for purchase to Treasury
Participants. As such, ICC operates in a manner that is different from
some other registered clearing agencies, which are constituted of
owner-members.\111\ Four positions on the Board, however, are reserved
for persons designated by the respective non-Board level Risk
Committees.\112\
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\111\ Securities Acts Amendments of 1975, Report of the Senate
Comm. on Banking, Housing and Urban Affairs to Accompany S. 249, S.
Rep. 94-75, 94th Cong., 1st Sess. 123-24 (1975) (``[T]he bill
establishes no norm as to whether clearing agencies should or should
not be operated for profit. The bill makes no attempt to set up
particular standards of representation or participation. Rather, it
provides that the Commission must assure itself that the rules of
the clearing agency regarding the manner in which decision are made
give fair voice to participants as well as to shareholder . . .
.'').
\112\ See Self-Regulatory Organizations; ICE Clear Credit LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Governance Playbook and Seventh Amended
and Restated Operating Agreement, Release No. 34-101820 (Dec. 5,
2024), 89 FR 99917 (Dec. 11, 2024) (File No. SR-ICC-2024-010).
Pursuant to Treasury Rule 508(a), effective as of the Treasury
Governance Commencement Date, the Treasury Risk Committee will have
authority to designate to ICC's Parent two of these persons for
election to the Board.
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Specifically, pursuant to Treasury Rule 508(a), effective as of the
Treasury Governance Commencement Date, the Treasury Risk Committee
shall have authority to designate to ICC's Parent two members for
election to the Board (with one independent).\113\ Moreover, pursuant
to Treasury Rule 502, ICC shall not take, or permit to be taken,
certain actions without consulting the Treasury Risk Committee. Such
actions include, among other things, modifying the Treasury Rules with
respect to clearing new or existing Contracts, modifying provisions
related to margin, and modifying provisions related to the Treasury
Guaranty Fund. ICC's Treasury Risk Committee will include
representatives of Treasury Participants and non-participants.\114\
This right will apply immediately from adoption of the Treasury Rules
and will not depend on the application of the Treasury Governance
Commencement Date. Finally, ICC currently has the same arrangement for
its CDS Business, and the CDS Risk Committee currently can designate
four members for election to the Board (with two independent).\115\
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\113\ As stated above, the Treasury Governance Commencement Date
means the date of the first annual Board election occurring after
the Treasury Business accounts for a specified percentage of ICC's
revenue and ICC has obtained a specified percentage of the overall
market share for Treasury clearing. See supra note 633.
\114\ Per Treasury Rule 503, the Treasury Risk Committee will
have fourteen members total, with nine being representatives of
Treasury Participants, two being representatives of non-
participants, two being officers of ICC, and one being an
independent member of the Board of Managers.
\115\ See ICC CDS Rules, Chapter 5. After the Treasury
Governance Commencement Date, the CDS Risk Committee and Treasury
Risk Committee each will designate two managers for election to the
Board, including an independent manager. The overall number of
managers designated by ICC participants and non-participants will
remain at four (of nine), with the selection split between the two
non-Board risk committees.
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Taken as a whole, the above-described provisions of the Application
provide Treasury Participants with the right to nominate certain
members of ICC's Board of Managers after the Treasury Governance
Commencement Date, as well as the immediate right to consult on certain
matters affecting ICC. Although the Treasury Risk Committee will not be
able to designate two members for election to the Board until after the
Treasury Governance Commencement Date, prior to that time participants
in the CDS Business will, as now, be able to designate four members for
election to the Board. Thus, while the Treasury Risk Committee will not
be able to designate to ICC's Parent two members for election to the
Board (with one independent) until the Treasury Governance Commencement
Date, ICC's current participants can designate four members for
election to the Board (with two independent) through the CDS Risk
Committee. Taken together, these provisions provide for fair
representation to all of ICC's participants, meaning Treasury
Participants and participants in the CDS Business, regarding the
selection of ICC's Board of Managers and the administration of ICC's
affairs at ICC as a whole, consistent with Section 17A(b)(3)(C) of the
Exchange Act.
For the reasons discussed directly above, the Commission determines
that the rules of ICC assure fair representation in the selection of
its directors and administration of its affairs consistent with Section
17A(b)(3)(C) of the Exchange Act.
D. Fees
1. Statutory Standard: Section 17A(b)(3)(D) and (E)
Section 17A(b)(3)(D) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the clearing agency provide for the equitable allocation
of reasonable dues, fees, and other charges among its
participants.\116\ Section 17A(b)(3)(E) of the Exchange
[[Page 5537]]
Act states that a clearing agency shall not be registered unless the
rules of the clearing agency do not impose any schedule of prices, or
fix rates or other fees, for services rendered by its
participants.\117\
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\116\ 15 U.S.C. 78q-1(b)(3)(D).
\117\ 15 U.S.C. 78q-1(b)(3)(E).
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2. Summary of Application and Analysis
ICC's Application does not include a fee schedule or schedule of
prices; however, the Application describes ICC's (i) authority to
determine and equitably allocate fees; (ii) rules regarding fees; and
(iii) the status of its proposed fee schedule.\118\ The Application
also references the current fees for the CDS Business and explains
where details about the fees for the CDS Business can be found on ICC's
website.\119\ The Application also states that ICC is developing its
fee schedule and will engage the marketplace on its ultimate fee
structure and that the fee schedule will be published on ICC's website
when the Treasury Business is launched after filing a proposed rule
change with the Commission pursuant to section 19(b)(3)(A) of the
Exchange Act.\120\
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\118\ See Exhibit E of the Application.
\119\ Id.
\120\ Id.
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Treasury Rule 606 requires that clearing fees and other charges for
ICC services be as fixed from time to time by ICC with the approval of
the Board of Managers.
In its letter, ICC explained the factors that ICC will consider in
setting fees for the Treasury Business. While ICC may consider various
factors, it identified four as examples: (i) market projections,
including anticipated volume, revenue and market participation in the
Treasury Business, (ii) costs and expenses in offering the Treasury
Business, taking into account the investments that ICC has made and the
level of investment and development needed for the clearing service,
(iii) external service provider charges incurred by ICC, and (iv)
market participant feedback.\121\ ICC further stated it will consider
the impact on competition in setting the clearing fees and will ensure
that such fees do not impose any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\122\ In Exhibit E of the Application, ICC further stated that its
fee schedule for the Treasury Business will be submitted to the
Commission as a proposed rule change pursuant to Section 19(b)(3)(A) of
the Exchange Act.\123\
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\121\ ICC Response Letter at 8.
\122\ Id.
\123\ See Exhibit E of the Application.
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(a) Analysis
While ICC does not yet have a fee schedule for the Treasury
Business, the Application identifies ICC's existing fee schedule for
the CDS Business and the rules governing any fees that it will assess
on its participants, as described above. These rules require that fees
and other charges be fixed by ICC with approval of the Board of
Managers. In its letter, ICC further identified the factors it will
consider in setting fees.\124\ As noted above, these factors would
include, among other things, market projections and costs and expenses
in offering the Treasury Business. In the Application, ICC stated it
will engage the marketplace as it develops its ultimate fee
structure.\125\ The Commission believes that considering these factors,
and engaging the marketplace as it develops its ultimate fee structure,
both should help ensure that ICC's fee schedule for the Treasury
Business is consistent with Section 17A(b)(3)(D) of the Exchange Act.
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\124\ ICC Response Letter at 8.
\125\ See Exhibit E of the Application.
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Separately, any fees, dues or other charges that ICC intends to
assess must be filed as a proposed rule change pursuant to Section
19(b) of the Exchange Act and Rule 19b-4 thereunder.\126\ Clearing
agency fees are subject to the requirements of the Exchange Act,
including Section 17A(b)(3)(D), and thus, the Commission would consider
if any future fee schedule for the Treasury Business is consistent with
17A(b)(3)(D) when it is filed as a proposed rule change.\127\
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\126\ See 15 U.S.C. 78s(b); 17 CFR 240.19b-4; see also Exhibit E
of the Application (acknowledging its obligations under Section
19(b) and Rule 19b-4).
\127\ 15 U.S.C. 78q-1(b)(3)(D); see also 15 U.S.C. 78s(b)
(requiring proposed rule changes to be filed by the Commission,
which shall publish notice thereof and give interest persons an
opportunity to respond). Some proposed rule changes regarding dues,
fees, or charges take effect upon filing. See 15 U.S.C.
78s(b)(3)(A)(ii); see also 15 U.S.C. 78s(b)(3)(C) (specifying when
the Commission may temporarily suspend the immediate effectiveness
of such filings).
---------------------------------------------------------------------------
Finally, under Section 17A(b)(3)(E) of the Exchange Act, ICC may
not impose any schedule of prices, or fix rates or other fees, for
services rendered by its participants. Although ICC does not yet have a
fee schedule for the Treasury Business, a review of ICC's current fee
schedule for its CDS Business shows that ICC does not impose any
schedule of prices, or fix rates or other fees, for services rendered
by its CDS Participants.\128\ Moreover, because any fees, dues or other
charges that ICC intends to assess must be filed as a proposed rule
change pursuant to Section 19(b) of the Exchange Act and Rule 19b-4
thereunder, the Commission will be able to consider if any future fee
schedule for the Treasury Business imposes any schedule of prices, or
fix rates or other fees, for services rendered by Treasury
Participants.
---------------------------------------------------------------------------
\128\ See Exhibit E of the Application. Details of the CDS
Business's current fees can be found at: <a href="https://www.ice.com/publicdocs/clear_credit/ICE_Clear_Credit_Fees.pdf">https://www.ice.com/publicdocs/clear_credit/ICE_Clear_Credit_Fees.pdf</a> and <a href="https://www.ice.com/publicdocs/clear_credit/ICE_Clear_Credit_Fees_Clearing_Participant.pdf">https://www.ice.com/publicdocs/clear_credit/ICE_Clear_Credit_Fees_Clearing_Participant.pdf</a>.
---------------------------------------------------------------------------
Accordingly, the Commission determines that the Application is
consistent with Section 17A(b)(3)(D) of the Exchange Act and Section
17A(b)(3)(E) of the Exchange Act.\129\
---------------------------------------------------------------------------
\129\ 15 U.S.C 78q-1(b)(3)(E).
---------------------------------------------------------------------------
E. Rules Designed To Promote Prompt and Accurate Clearance and
Settlement and the Safeguarding of Securities and Funds
1. Statutory Standard: Section 17A(b)(3)(F)
Section 17A(b)(3)(F) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the 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, to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible, to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions, to
remove impediments to and perfect the mechanism of a national system
for the prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest. It also states that a clearing agency shall not be registered
unless the Commission determines that the rules are not designed to
permit unfair discrimination in the admission of participants or among
participants in the use of the clearing agency, or to regulate by
virtue of any authority conferred by the Exchange Act matters not
related to the purposes of this section or the administration of the
clearing agency.\130\
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\130\ With respect to the provisions in Section 17A(b)(3)(F) of
the Exchange Act requiring that the rules of the clearing agency are
not designed to permit unfair discrimination in the admission of
participants or among participants in the use of the clearing agency
and not regulate by virtue of any authority conferred by the
Exchange Act matters not related to the purposes of the Exchange Act
or the administration of the clearing agency, those topics have been
addressed in Parts III.B and III.G, concerning the statutory
requirements for, respectively, participant standards of the
clearing agency and addressing the clearing agency's burden on
competition. With respect to the provisions requiring that the rules
foster cooperation and coordination with persons engaged in the
clearance and settlement of securities transactions and to remove
impediments to and perfect the mechanism of a national system for
the prompt and accurate clearance and settlement of securities
transactions, those topics have been addressed in Part III.G,
concerning the statutory requirements addressing the clearing
agency's burden on competition.
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[[Page 5538]]
2. Summary of Application and Analysis
The Commission has adopted multiple rules that are related to
Section 17A(b)(3)(F), in that they establish requirements related to
financial risk management, default management and loss allocation, and
recovery and orderly wind-down. Specifically, these Commission rules
implicate the safeguarding of securities and funds and promoting the
prompt and accurate clearance and settlement of securities
transactions, including the collection of margin, composition of the
guaranty fund, default management and loss allocation procedures, and
other risks.\131\ To analyze ICC's Application under Section
17A(b)(3)(F), the Commission has considered ICC's Treasury Rules
concerning its account structures, margin system, guaranty fund,
default management, and loss allocation processes, as set forth in
further detail below.
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\131\ See 17 CFR 240.17ad-22(e)(4), (e)(6), (e)(13),
(e)(23)(ii); 240.17ad-26.
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As a threshold matter, the Application establishes a comprehensive
risk management framework consistent with Commission rules that help
ensure ICC will collect sufficient margin to cover its exposures,
maintain an appropriately sized Guaranty Fund, and be able to manage a
default and allocate losses appropriately, if or when needed. ICC's
risk management framework is designed to address the particular
features of ICC's proposed participation structure, i.e., to manage the
risks presented by Treasury Participants and Clients clearing via a
Treasury Participant who have different obligations and access to ICC.
For these reasons and the reasons discussed below, the Commission
determines that ICC's rules are consistent with the requirements for
the prompt and accurate clearance and settlement of securities and the
safeguarding of funds and securities as set forth in Section
17A(b)(3)(F) of the Exchange Act and do not regulate by virtue of any
authority conferred by the Exchange Act matters not related to the
purposes of Section 17A of the Exchange Act or the administration of
the clearing agency.
(a) Account Structure and Safeguarding of Securities and Funds
ICC offers separate margin accounts for the positions of Treasury
Participants and their Clients. A House Margin Account holds Margin for
House Positions.\132\ Margin for Client positions may be held in a
Client-Funded Gross IM Account, Clearing Participant-Funded Gross IM
Account, Hybrid Gross IM Account, or Net Client IM Account.\133\ ICC
states that these accounts serve two important functions.\134\ They
keep House Margin separate from Client-Funded Margin and they also keep
Client-Funded Margin separate from House Margin.\135\ Specifically,
Client-Funded Margin is housed in Client-Funded Gross IM Accounts or
the relevant subaccount associated with Hybrid Gross IM Accounts.\136\
Alternatively, House-Funded Client Margin is held in Clearing
Participant-Funded Gross IM Accounts, Net Client IM Accounts, or the
relevant subaccount associated with a Hybrid Gross IM Account.\137\
Once posted, ICC either invests Initial Margin in a bank deposit at a
commercial bank or pursuant to reverse repurchase agreements backed by
certain U.S. Treasury securities.\138\
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\132\ Exhibit J of the Application, at 5; Treasury Rule 102.
\133\ Exhibit J of the Application, at 5.
\134\ Id.
\135\ Id.
\136\ Id. Hybrid Gross IM Accounts have separate subaccounts
dedicated to contributions from Treasury Participants and Non-
Participant Parties. Treasury Rules, at Rule 102.
\137\ Exhibit J of the Application, at 5.
\138\ Exhibit L of the Application, at 2.
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In Exhibit L, ICC describes how it safeguards its own assets and
the assets of Treasury Participants and Clients.\139\ ICC does so by
using only approved settlement banks, custodians, and other financial
service providers that ICC has chosen based on their ability to provide
the services required by ICC, creditworthiness, relevant experience and
operational stability. ICC conducts due diligence reviews to assess
whether its settlement banks and custodians employ adequate accounting
practices; safekeeping procedures and internal controls that protect
deposits; ensure full segregation and protection of financial
instruments and allow ICC prompt access to assets when required. In
addition, ICC monitors the financial health of the financial
institutions in which it holds its settlement and custodial accounts on
an ongoing basis, with an emphasis on measures related to liquidity and
cash management.\140\
---------------------------------------------------------------------------
\139\ Id.
\140\ Exhibit L of the Application, at 1.
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As further described in Exhibit J, ICC will use its established
direct settlement model to manage the settlement of Variation Payments,
Initial Margin, and Treasury Guaranty Fund contributions. Treasury
Participants will provide ICC with direct debit authority against their
Treasury Business accounts, which are designated accounts that can
accommodate SWIFT messages. ICC will move cash between its commercial
bank accounts for settlement of payments. ICC also will maintain a
second set of accounts as a backup facility if ICC is unable to access
its primary bank account. Treasury Participants will be responsible for
ensuring that ICC has timely received any requested payments; if not,
ICC may declare them in default.\141\
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\141\ Exhibit J of the Application, at 4.
---------------------------------------------------------------------------
Commenters made suggestions regarding risk management procedures
related to the relationship between a Treasury Participant and a
Client, including with respect to porting of Client accounts,\142\ a
Client default,\143\ and the holding of Client collateral.\144\
Commenters also made suggestions regarding how the Treasury Rules
affect the legal relationship between a Treasury Participant and a
Client.\145\
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\142\ FIA at 10-11 and ISDA at 7-8 (require all parties to
consent prior to porting a Client, including the transferring
Treasury Participant and the receiving Treasury Participant; only
port if the transfer of positions does not result in margin
deficiency for receiving Treasury Participant; allow a Client to
designate a backup Treasury Participant to receive positions); SIFMA
& AMG at 10 (make porting subject to agreement of all parties and
prior notice to Client).
\143\ See FIA at 7-9 and ISDA at 3-6 (among other things, allow
a Treasury Participant to trigger a Client default and manage the
default; allow a Treasury Participant to port a Client's
transactions to another Treasury Participant; convert a House
position into a Client position or transfer a Client's transactions
to the Treasury Participant's House account upon a Client default;
permit a Client's transactions to settle in the ordinary course
after default; narrow the indemnity that a Treasury Participant
provides to ICC in the event ICC manages a Client default; and allow
a receiving party to conduct a buy-in at its discretion where a
delivery party has failed to deliver securities). See also SIFMA &
AMG at 10 (clarify the obligations of Treasury Participants in
determining losses arising from Client positions; provide a means
for Clients to dispute determinations made by Treasury Participants;
and allow Client transactions to settle in the ordinary course after
a Treasury Participant's default).
\144\ SIFMA & AMG at 3 and 5-6 (clarify where and how it will
hold Pledged Items and clarify there will not be cross-contamination
between Gross IM and Net IM Accounts in the event of application of
funds in the Treasury Guaranty Fund).
\145\ See SIFMA & AMG at 12 (clarify that certain of the
Treasury Rules do not dictate the terms of the relationship between
a Treasury Participant and a Client); FIA at 13 (allow a Treasury
Participant to obtain a Client's agreement to be bound by all of the
Treasury Rules generally, rather than identifying each particular
Treasury Rule in the agreement between the Treasury Participant and
Client and make available an account analysis and legal opinion
demonstrating that a Treasury Participant acts as an agent when
clearing transactions for a Client).
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[[Page 5539]]
In its response letter, ICC stated that it may consider amending
the Treasury Rules, such as Treasury Rule 316(g), to address some of
the comments, such as permitting a Treasury Participant to manage a
Client default unless it elects to have ICC manage the Client
default.\146\ ICC further explained, however, that the Treasury Rules
currently permit a Treasury Participant, upon request to ICC, to manage
the default of its Client.\147\ With respect to the relationship among
ICC, Treasury Participants, and their Clients, ICC explained that it
intentionally omitted any privity of contract between ICC and Clients,
because ICC has no legal agreements with Clients.\148\ Moreover, ICC
stated that the Treasury Rules should not, and do not, dictate the
terms of the relationship between Treasury Participants and
Clients.\149\
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\146\ ICC Response Letter at 5.
\147\ Id.
\148\ ICC Response Letter at 7.
\149\ Id.
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ICC further stated that the commenters' suggestions generally
consist of clarifications or recommendations to refine or add
optionality. While ICC committed to working with commenters on their
suggestions and clarifications, ICC also stated that the comments did
not necessarily affect whether the Application is consistent with the
Exchange Act or the rules thereunder.\150\ The Commission agrees that
the commenters' suggestions pertain to certain choices ICC has made in
designing its clearing agency but do not bear on whether ICC's
Application is consistent with a specific Commission rule, or whether
ICC's Application more generally meets the standard for registration.
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\150\ ICC Response Letter at 5.
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(b) Margin System
As described in Exhibit J, a Treasury Participant must post margin
for its own positions and on behalf of its Clients. Specifically, each
Treasury Participant is responsible for ensuring that Margin is met for
its Client-Related Positions and transferring to ICC cash or other
collateral needed to meet such Margin requirement. Clients may choose
between net or gross margin position accounts, as described further in
Exhibit J.\151\ These accounts allow a Client to choose whether to fund
all, some, or none of its Margin requirement. ICC will maintain Client-
funded Client Margin in separate, legally segregated, margin accounts
from House-funded Client Margin or House Margin. Finally, ICC will
determine Margin for each Treasury Participant in respect of its House
Positions and in respect of any applicable Client-Related Positions,
following the close of business on each ICE Business Day, based on 99%
Value-at-Risk equivalent risk measures with additional liquidity and
concentration requirements.\152\
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\151\ Exhibit J of the Application, at 3. As noted, Client-
Related Positions may be held in: (i) Client-Funded Gross IM
Accounts, (ii) Clearing Participant-Funded Gross IM Accounts, (iii)
Hybrid Gross IM Accounts or (iv) Net Client IM Accounts.
\152\ The estimated Value-at-Risk measures are based on forward-
looking simulated scenarios corresponding to at least a 2-day margin
period of risk. ICC also uses Monte-Carlo simulations to estimate
Initial Margin requirements and considers anti-procyclicality in
determining margin amounts. Exhibit J of the Application, at 3-4.
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ICC's margin system also includes a Variation Payment. The
Variation Payment results from changes in the market value of a
Treasury Participant's own positions and the positions of the Treasury
Participant's Clients.\153\
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\153\ Exhibit J of the Application, at 4.
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Commenters made suggestions regarding ICC's margin system,
including requiring Treasury Participants to return to Clients any
Client-funded collateral that is in excess of the margin requirements
for the Client positions; \154\ re-characterizing ICC's security
interest in collateral; \155\ implementing a collateral-in-lieu model;
\156\ clarifying certain points regarding variation margin \157\ and
intraday margin; \158\ and establishing cross-margining
relationships.\159\ ICC responded that it will consider the request for
clarifications and continue to engage with market participants on these
suggestions.\160\ ICC also stated that it will file any changes to the
Treasury Rules as proposed rule changes under Section 19(b) under the
Exchange Act, as appropriate. Overall, the commenters' suggestions
pertain to certain choices ICC has made in designing its clearing
agency, but do not bear on whether ICC's Application is consistent with
a specific Commission rule, or whether ICC's Application more generally
meets the standard for registration.
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\154\ SIFMA & AMG at 5.
\155\ SIFMA & AMG at 4 (define ICC's security interest in
collateral as a ``springing'' security interest, meaning that the
security interest only applies if a repurchase agreement is
characterized as a loan).
\156\ SIFMA & AMG at 3.
\157\ FIA at 11-12; ISDA at 8 (clarify the language regarding
the settlement of variation margin in Treasury Rule 401(l) so
outstanding exposures are not reset to zero); SIFMA & AMG at 4 (base
the variation margin payment on changes in the value of collateral
rather than the market price of the trade); and SIFMA & AMG at 13
(provide legal opinion that cash transferred as variation margin
payments will be treated as settlement payments rather than posted
margin).
\158\ SIFMA & AMG at 5 (clarify when Clients are required to
satisfy intraday margin calls, as Treasury Rule 401(a)(ii) specifies
that intraday margin needs to be delivered by Treasury Participants
within one hour of notice but does not make clear if margin calls
affecting Clients will similarly need to be satisfied within one
hour.).
\159\ SIFMA & AMG at 5; letter from Jiri Krol, Alternative
Investment Management Association, dated Oct. 6, 2025 (``AIMA''), at
2.
\160\ ICC Response Letter at 6-7.
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Commenters also requested that ICC allow Treasury Participants to
post Treasury securities as collateral.\161\ In response, ICC explained
that Treasury Participants may use Treasuries, not just cash, to
satisfy a portion of their requirements.\162\ ICC further stated that
the use of Treasuries to satisfy a portion of margin and guaranty fund
requirements is explicitly permitted by Schedule 401 to the Treasury
Rules.\163\ Thus, the Treasury Rules already address the commenters'
request.
---------------------------------------------------------------------------
\161\ FIA at 12; ISDA at 8.
\162\ ICC Response Letter at 6.
\163\ Schedule 401 is included at the end of the Treasury Rules,
which are Annex E-2 to the Application.
---------------------------------------------------------------------------
(c) Guaranty Fund
As described in Exhibit J, ICC will establish and maintain a
Treasury Guaranty Fund. Treasury Participants will be required to
contribute to the Treasury Guaranty Fund, per Treasury Rule 801.\164\
ICC will base a Treasury Participant's contribution on its House
Positions and its Client-Related Positions.\165\ Treasury Participants
will be required to contribute to the Treasury Guaranty Fund on behalf
of their Clients.\166\
---------------------------------------------------------------------------
\164\ Exhibit J of the Application, at 6.
\165\ Treasury Rule 801.
\166\ Id.
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As described in Exhibit J, the required contribution to the
Treasury Guaranty Fund by a Treasury Participant is risk-based and uses
a set of stress scenarios that includes adverse changes to the
underlying U.S. Treasury security-related term structures in response
to changes in the U.S. interest rate levels across different tenors and
maturities enhanced with changes of associated term structure
shapes.\167\ More specifically, as set out in Treasury Rule 801, each
Treasury Participant's required contribution to the Treasury Guaranty
Fund will be based on the greater of (i) such Treasury Participant's
proportionate share of the aggregate
[[Page 5540]]
Treasury Participant Loss Exposure, which is calculated as the two
largest Participant Loss Exposures, and (ii) $20 million. Participant
Loss Exposure for any Treasury Participant is the amount determined by
ICC using its stress test methodology, calculated on a net exposure
basis separately within the House Positions and Client-Related
Positions of that Treasury Participant. The amount is equal to the
expected losses to ICC associated with the default of that Treasury
Participant considering both (i) the uncollateralized loss (meaning the
loss after application of Initial Margin and after considering any
Variation Payment transferred in respect of such positions given
default), and (ii) the uncollateralized loss from contracting or
widening credit spreads.
---------------------------------------------------------------------------
\167\ Exhibit J of the Application, at 6.
---------------------------------------------------------------------------
Regarding the Treasury Guaranty Fund sizing, Rule 17Ad-
22(e)(4)(iii) requires covered clearing agencies to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to, among other things, maintain additional
financial resources at a minimum to enable it to cover a wide range of
foreseeable stress scenarios that include, but are not limited to, the
default of the participant family that would potentially cause the
largest aggregate credit exposure for the covered clearing agency in
extreme but plausible market conditions. As described in Exhibit J, ICC
will size the Treasury Guaranty Fund to provide financial resources
based on Cover-2 regulatory standards.\168\ As further described in
Treasury Rule 801, this means ICC will set the size of the Treasury
Guaranty Fund to, at a minimum, maintain pre-funded financial resources
sufficient to enable ICC to meet its financial obligations to Treasury
Participants notwithstanding a default by the two Treasury Participants
(including any of their affiliated Treasury Participants) creating the
largest combined loss to ICC in extreme but plausible market
conditions. ICC's approach is consistent with Commission rules because
ICC's Treasury Guaranty Fund sizing methodology may produce a Treasury
Guaranty Fund size larger than the one computed to the default of the
participant family that would potentially cause the largest aggregate
credit exposure. Therefore, the Treasury Guaranty Fund sizing
methodology is reasonably designed to be consistent with Rule 17Ad-
22(e)(4)(iii).
---------------------------------------------------------------------------
\168\ Id.
---------------------------------------------------------------------------
(d) Default Management and Loss Allocation
In Exhibit J, ICC states that it operates using a contemporary
clearinghouse risk waterfall, including a robust risk management
framework.\169\
---------------------------------------------------------------------------
\169\ Exhibit J of the Application, at 3.
---------------------------------------------------------------------------
Pursuant to the Treasury Rules, upon ICC's determination that a
Treasury Participant is in Default,\170\ ICC must provide notice of the
Default, including the identity of the defaulting participant, as soon
as reasonably practicable to the other Treasury Participants and the
public.\171\ Treasury Rule 20-605(d) provides that ICC may hedge open
positions of the defaulter.\172\ ICC also may initiate the Closing-out
Process with respect to the defaulting Treasury Participant.\173\ The
Closing-out Process includes the immediate termination of all of such
defaulting Treasury Participant's Open Positions and then the
satisfaction of any Reimbursement Obligations by the defaulting
Treasury Participant, for which ICC can apply the Margin and other
assets provided by the defaulting Treasury Participant based on the
waterfall set forth in Treasury Rule 20-605(c).
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\170\ ICC may determine that a Treasury Participant is in
Default if the Treasury Participant or guarantor, among other
things, (i) fails to meet any membership obligations, (ii) is in
breach of the terms of membership or is suspended, or (iii) is
terminated, suspended or has certain clearing privileges revoked
pursuant to Treasury Rule 615(b). See Exhibit J of the Application,
at 6.
\171\ Treasury Rule 20-605(b).
\172\ Id.
\173\ Treasury Rule 20-605(a). As defined in Treasury Rule 102,
``Closing-out Process'' means, in connection with the Default of a
Treasury Participant, the process of termination of Open Positions,
determination of amounts owing with respect thereto, netting of such
amounts, liquidation and application of any Margin and/or
Collateral, and application of Post-Default Portability Rules
pursuant to Treasury Rule 20A-02, if applicable.
---------------------------------------------------------------------------
With respect to the default of a Treasury Participant that is also
a participant in ICC's CDS Business, ICC stated that should a
participant default in one business line, ICC will not automatically
declare the participant in default in the other business line. Default
in one business line, however, could lead to ICC determining that the
participant is likely to fail to meet its obligations to the other
business line, which could in turn be a basis for declaring the
participant to be in default in the other business line. Where a common
participant is declared in default in both the CDS Business and
Treasury Business, ICC will conduct independent liquidations and
default auctions and maintain separate default resources.\174\
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\174\ ICC Response Letter at 8-9.
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With respect to the default of a Client, ICC will resolve the
default, unless the associated Treasury Participant requests to manage
the default directly instead. Based on the election of a Treasury
Participant, if ICC resolves a Client's Default, ICC will only use the
Client-Funded Initial Margin for Client-Related Positions to cover any
losses. If the losses exceed the Client-Funded Initial Margin, then ICC
may cover any remaining losses with the Client-related margin that was
funded by the Treasury Participant, if any. The Treasury Participant is
liable for any remaining losses associated with the Client, so ICC also
can apply the Treasury Participant's contributions to the Treasury
Guaranty Fund in accordance with Treasury Rule 802 or make special
Margin calls to the Treasury Participant. However, ICC will not apply
any Initial Margin with respect to any House Positions of the Treasury
Participant with respect to such excess Client losses.
A Treasury Participant may request to directly manage the Client's
default. In that case, the Treasury Participant is responsible for
managing the closing of Client-Related Positions between the Treasury
Participant and defaulting Client. The Treasury Participant remains
responsible to ICC for the performance of any such Client-Related
Positions, and ICC will not be responsible for any losses, costs, or
expenses.
ICC also employs liquidity risk management mechanisms that are
designed to allow ICC to satisfy its liquidity obligations. As further
described in Treasury Rule 812(a), if a Settlement Payment Failure or a
Delivery Failure occurs, and ICC determines that it would otherwise
have or may have insufficient cash liquidity to complete physical
settlement, ICC may designate a Settlement Liquidity Event. In the case
of a Settlement Liquidity Event, Treasury Rule 812(b) sets out a
waterfall of resources that ICC may apply or use to obtain cash
liquidity, as described below. ICC must fully use resources at one
level of the waterfall before using resources from a subsequent level.
1. The portion of Initial Margin provided by the Failing Party in
respect of its House Account or its portion of the Treasury Guaranty
Fund contribution that is in cash;
2. Cash portions of the ICC initial Contribution;
3. The ICC Continuing Contribution;
4. The Treasury Guaranty Fund contributions of Treasury
Participants other than Failing Parties on a pro rata basis;
5. The Initial Margin provided by Treasury Participants other than
Failing Parties in respect of their House
[[Page 5541]]
Accounts that is in cash on a pro rata basis;
6. Credit facilities or committed repurchase agreement facilities
secured by non-cash Initial Margin and Treasury Guaranty Fund
contributions provided by Failing Parties;
7. Cash obtained by ICC requiring Treasury Participants other than
Failing Parties to substitute cash for the non-cash portions of their
existing House Initial Margin and guaranty fund contributions;
8. An additional liquidity contribution from ICC's own resources;
\175\ and
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\175\ Treasury Rule 812(b). In connection with this, ICC may
impose a liquidity assessment on Treasury Participants to transfer
additional cash in an amount determined by ICC in accordance with
Treasury Rule 812(b)(vi).
---------------------------------------------------------------------------
9. Lines of credit, loan agreements, repurchase agreements or
similar facilities on a secured or unsecured basis.\176\
---------------------------------------------------------------------------
\176\ Treasury Rule 812(b).
---------------------------------------------------------------------------
Commenters requested that ICC obtain legal opinions relating to the
default management aspects of ICC's margin framework (i.e., confirming
the bankruptcy remoteness of margin held by ICC and enforceability of
ICC's rules in the event of insolvency).\177\ ICC responded that it
will continue to consider these and provide documentation or submit
changes under Section 19(b) of the Exchange Act, as appropriate.\178\
ICC stated that the Application nevertheless demonstrated that the
Treasury Business is built on a well-founded, clear, transparent, and
enforceable legal basis, consistent with Rule 17Ad-22(e)(1) under the
Exchange Act.\179\
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\177\ FIA at 12-13; ISDA at 8-9; and SIFMA & AMG at 13. These
requests for legal opinions relate to ICC's ability to safeguard
securities and funds for which it is responsible, which implicate
the Commission's required determination in Section 17A(b)(3)(F) of
the Exchange Act. See supra section III.E.
\178\ ICC Response Letter at 7-8.
\179\ Id.
---------------------------------------------------------------------------
Regarding legal opinions, the Commission has previously stated that
``[b]ecause the appropriate use of legal opinions will vary on a case-
by-case basis, the Commission does not believe it is appropriate to
modify Rule 17Ad-22(e)(1) to include a specific requirement for legal
opinions addressing particular matters.'' \180\ Accordingly, ICC's
approach is consistent with Commission rules.
---------------------------------------------------------------------------
\180\ See CCA Standards Adopting Release, supra note 6, 81 FR at
70801-02.
---------------------------------------------------------------------------
Commenters also requested that ICC eliminate Treasury Rule 808,
which allows ICC to haircut variation margin gains in certain
situations involving the default of a Treasury Participant (also known
as reduced gains distribution).\181\ These commenters stated that the
variation margin gains haircutting/reduced gains distribution
(``VMGH''), while commonplace in derivatives clearing, is not
appropriate for repo clearing.\182\ Also, these commenters noted that
because repos are used as liquidity and funding instruments, use of
VMGH could have serious liquidity implications and exacerbate the
stressed market conditions likely to exist in a Treasury Participant
default scenario.\183\ ICC explained that while VMGH may not be
appropriate in all circumstances of Treasury clearing, it is a tool
that ICC may use in limited circumstances.\184\ ICC further stated that
Treasury Rule 808 may become more relevant to Treasury clearing as the
Treasury Business evolves.\185\
---------------------------------------------------------------------------
\181\ FIA at 10; ISDA at 6.
\182\ Id.
\183\ Id.
\184\ ICC Response Letter at 5.
\185\ Id.
---------------------------------------------------------------------------
Commission rules do not require or prohibit the use of a particular
default management tool, such as VMGH.\186\ As such, ICC has discretion
regarding the tools it will use to manage a default in its Treasury
Business, including VMGH, subject to consistency with the Exchange Act
and the rules thereunder.\187\ As the Commission has noted in other
instances, tools like VMGH, which allocate losses to non-defaulting
customers, may be necessary to prevent the potential transmission of
systemic risk.\188\ Even if, as suggested by commenters, VMGH is not
appropriate for repo clearing because it could cause liquidity concerns
and exacerbate stressed market conditions, Commission rules and the
applicable Exchange Act standards do not address such issues or
prohibit ICC from using VMGH or maintaining it as a tool to use at
least in limited circumstances. Accordingly, ICC's approach is
consistent with Commission rules.
---------------------------------------------------------------------------
\186\ See CCA Standards Adopting Release, supra note 6, 81 FR at
70829 (``Rule 17Ad-22(e) does not prescribe a specific tool or
arrangement to achieve its requirements . . . when determining the
content of its policies and procedures with respect to default
management, each covered clearing agency must have the ability to
enhance its policies and procedures to meet the evolving challenges
and risks in the securities market that the covered clearing agency
serves.'').
\187\ See Covered Clearing Agency Resilience and Recovery and
Orderly Wind-Down Plans, Release No. 34-101446 (Oct. 25, 2024), 89
FR 91000, 91022 (Nov. 18, 2024) (``RWP Adopting Release'') (``The
Commission also disagrees that prescribing the tools a CCA must
deploy in recovery and wind-down scenarios would be most effective
at protecting non-defaulting customers' assets. As the Commission
has previously explained, a `one-size-fits-all' approach specifying
recovery and orderly wind-down tools is not productive, and it is
not possible to assess the utility of a particular tool in isolation
without considering the context of RWP as a whole and the particular
circumstances of a CCA.'').
\188\ Id. at 91022 (``tools . . . to allocate losses to non-
defaulting customers may be necessary to prevent the potential
transmission of systemic risk'').
---------------------------------------------------------------------------
Regarding default management, one commenter described ICC's
corporate contribution to the default waterfall as ``dynamic and capped
at a relatively high level'' and recommended ``the SEC evaluate the
amount, structure, and adjustment cadence to assess the adequacy of the
ICC contribution.'' \189\ As further described in Treasury Rule 801(b),
ICC's total expected contribution is $100 million.\190\
---------------------------------------------------------------------------
\189\ SIFMA & AMG at 12.
\190\ Treasury Rule 801(b); Exhibit J of the Application, at 6.
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The appropriate amount of a clearing agency's own contribution to
its default management process varies depending on the structure of the
clearing agency, the characteristics of the assets cleared, and the
markets served by the clearing agency, and registered clearing agencies
have taken different approaches to applying their own resources to the
default management process. The Commission does not require that a CCA
have ``skin-in-the-game'' to address or allocate losses, and Rule 17Ad-
22(e)(4)(iii) does not require any particular amount of ``skin-in-the-
game.'' \191\ Previously, the Commission has considered commenters'
views regarding requirements for ``skin-in-the-game,'' stating that
such new requirements can help successfully manage the divergent
incentives of a CCA's owners and participants and could be appropriate
in the future.\192\ However, as the Commission has also stated, it is
appropriate to provide a CCA with flexibility, subject to its
responsibilities as a self-regulatory organizations (``SRO'') under the
Exchange Act, to structure its default management processes to take
into account the particulars of its financial resources, ownership
structures, and risk management frameworks.\193\ Furthermore, the
proper alignment of incentives is an important element of a CCA's risk
management practices, and ``skin-in-the-game'' may play a role in those
risk management practices in many instances but in other instances
[[Page 5542]]
may not be essential to a governance framework.\194\ ICC is afforded
this flexibility under the CCA regulatory framework and has the
discretion to size its corporate contribution subject to its
obligations and responsibilities as an SRO under the Exchange Act.
Setting aside the size of the corporation contribution ICC determines
to include in its default waterfall, ICC is required by Rule 17Ad-
22(e)(4)(iii) to maintain written policies and procedures reasonably
designed to maintain financial resources to cover a wide range of
foreseeable stress scenarios, including the default of the largest
participant family in extreme but plausible market conditions.\195\ For
the reasons previously discussed in Part III.E.2.c), the Treasury Rules
are consistent with the requirements of Rule 17Ad-22(e)(4)(iii).
---------------------------------------------------------------------------
\191\ See RWP Adopting Release, supra note 187187, 89 FR at
91037; CCA Standards Adopting Release, supra note 6, 81 FR at 70805-
06.
\192\ See RWP Adopting Release, supra note 187187, 89 FR at
91037; Clearing Agency Governance Release, supra note 69, at 84504;
CCA Standards Adopting Release, supra note 6, 81 FR at 70806.
\193\ See CCA Standards Adopting Release, supra note 6, 81 FR at
70806.
\194\ See id.
\195\ See 17 CFR 240.17ad-22(e)(4)(iii).
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F. Participant Discipline
1. Statutory Standard and Analysis: Section 17A(b)(3)(G)
Section 17A(b)(3)(G) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the clearing agency provide that (subject to any rule or
order of the Commission pursuant to Sections 17(d) or 19(g)(2) of the
Exchange Act) its participants shall be appropriately disciplined for
violation of any provision of the rules of the clearing agency by
expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, or any other fitting sanction.
With respect to discipline and sanctions, Treasury Rule 609(a)
provides that ICC has the power to discipline Treasury Participants,
including by suspension or revocation of clearing privileges, for
engaging in conduct inconsistent with just and equitable principles of
trade or for any act or practice, or the omission thereof, that
violates ICC's rules or procedures.\196\ ICC also has the power to
assess fines or charges against a Treasury Participant in accordance
with the process outlined in Chapter 7 of the Treasury Rules.\197\
---------------------------------------------------------------------------
\196\ Treasury Rule 609(a).
\197\ Treasury Rule 609(b).
---------------------------------------------------------------------------
Chapter 7 of the Treasury Rules sets out a process for ICC to use
when disciplining Treasury Participants. Treasury Rule 701 provides
that ICC has the authority to initiate and conduct investigations of
conduct that is inconsistent with just and equitable principles or
violations of ICC's rules and procedures.\198\ This authority is
generally vested in the ICC Chief Compliance Officer, other ICC
employees, and ICC's Business Conduct Committee.\199\ Chapter 7
outlines the requirements for a formal hearing on a disciplinary
action, including notice to the Treasury Participant, a written answer
by the Treasury Participant, and the right to request a hearing before
a hearing panel.\200\ Per Treasury Rule 712, if the hearing panel finds
that a Treasury Participant committed an alleged violation, it must
render a written decision to that effect, and the written decision must
include an order stating any penalty imposed.\201\ The penalty shall be
one or more of the following: (i) a cease and desist order or
reprimand; (ii) a fine up to one hundred thousand dollars for each
violation plus the monetary value of any benefit received as a result
of the alleged violation; and (iii) a recommendation to the Board to
impose a suspension or revocation of clearing privileges or a
termination of Treasury Participant status.
---------------------------------------------------------------------------
\198\ Treasury Rule 701.
\199\ Treasury Rules 702 and 703. Per Treasury Rule 703(b), the
Business Conduct Committee shall be comprised of the independent
managers of the ICC Board.
\200\ Treasury Rules 704, 705, 706, 711, and 712.
\201\ Treasury Rule 712.
---------------------------------------------------------------------------
Further, Rule 207 of the ICC Treasury Clearing Rules provides that
in the case of a Termination Event,\202\ ICC may, in its sole
discretion, terminate the status of a Treasury Participant, subject to
Rule 615(b).\203\
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\202\ Termination Event is defined in Treasury Rule 207(b) to
mean, among other things, the default of a Treasury Participant and
the material breach by the Treasury Participant of the Treasury
Rules or any of the terms or provisions of any agreement between ICC
and the Treasury Participant which is not remedied promptly after
notice from ICC.
\203\ Rule 615(b) of ICC Treasury Clearing Rules provides, in
part, that ``[a]ny determination to suspend or revoke the clearing
privileges of a Treasury Participant, or to terminate its status as
a Treasury Participant, granted to [ICC] pursuant to these Rules or
the Treasury Procedures, including, without limitation, as provided
in Rules 203(a), 207(a) and 609(a), shall be made only with the
consent of the Board (in a vote excluding any member who is an
employee of such Treasury Participant or any Affiliate). . .'').
---------------------------------------------------------------------------
Commenters stated that ICC's proposed fines could be excessive if
imposed for each failure to submit a transaction for clearing in
accordance with Treasury Rule 303.\204\ Treasury Rule 303 generally
requires each Treasury Participant to submit to ICC or another covered
clearing agency (as defined in Exchange Act Rule 17Ad-22) for clearing
all Trades in Contracts that are eligible for clearing and are Eligible
Secondary Market Transactions, in furtherance of Rule 17Ad-
22(e)(18)(iv).\205\ These commenters asked ICC to consider good-faith
efforts to remedy failures and further that ICC allow Treasury
Participants to (i) initially notify ICC of non-compliance with the
trade submission requirement, then (ii) work to remediate the issue
that may have caused the non-compliance, without the imposition of
penalties. In response, ICC explained that the fines are for general
application, not particular to Treasury Rule 303, and provide a fair
procedure for disciplining Treasury Participants.\206\ ICC further
explained that the fines are not automatic for violations of the
Treasury Rules, including Rule 303.\207\ ICC cited, for example,
Treasury Rule 702(d), which allows ICC to issue a warning letter to a
Treasury Participant.
---------------------------------------------------------------------------
\204\ FIA at 7; ISDA at 3.
\205\ 17 CFR 240.17ad-22(e)(18)(iv). Commenters also requested
clarifications to certain parts of Rule 303, such as allowing trades
to continue bilaterally if rejected by ICC; excepting trades that
fail to submit to ICC because of technological issues; and
incorporating into the definition of Eligible Secondary Market
Transaction any future definitions or interpretations issued by the
Commission. See FIA at 6; ISDA at 2-3; SIFMA & AMG at 11. In
response, ICC explained that it intends Treasury Rule 303 to comply
with Rule 17Ad-22(e)(18)(iv). ICC Response Letter at 4.
\206\ ICC Response Letter at 4.
\207\ Id.
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ICC has procedures for enforcing rules and discipling Treasury
Participants that are consistent with the requirements of the Exchange
Act. ICC's rules provide it with authority to discipline Treasury
Participants for rule violations and to impose each of the sanctions
enumerated in the Exchange Act. Accordingly, the Commission determines
that the Treasury Rules provide that ICC's Treasury Participants shall
be appropriately disciplined for violation of any provision of the
rules consistent with the requirements of Section 17A(b)(3)(G) of the
Exchange Act.
2. Statutory Standard and Analysis: Section 17A(b)(3)(H)
Section 17A(b)(3)(H) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission determines that
the rules of the clearing agency, in general, provide a fair procedure
with respect to the disciplining of participants, the denial of
participation to any persons seeking participation therein, and the
prohibition or limitation by the clearing agency of any person with
respect to access to services offered by the clearing agency.\208\
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\208\ Section 17A(b)(3)(H) of the Exchange Act also states that
the rules of the clearing agency must be in accordance with the
provisions of Section 17A(b)(5) of the Exchange Act.
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[[Page 5543]]
Chapter 7 of the Treasury Rules sets out a process for ICC to use
when disciplining Treasury Participants. Treasury Rule 701 allows ICC
to initiate and conduct investigations of conduct that is inconsistent
with just and equitable principles or violations of ICC's rules and
procedures and which is allegedly committed by Treasury Participants,
and impose sanctions for such conduct.\209\ This authority is generally
vested in the ICC Chief Compliance Officer, other ICC employees, and
ICC's Business Conduct Committee, which is comprised of the independent
managers of the ICC Board.\210\ More specifically, ICC staff conducts
investigations of possible violations, prepares written reports
respecting such investigations, furnishes such reports to the Chief
Compliance Officer and Business Conduct Committee, and conducts the
prosecution of such violations.\211\ The Business Conduct Committee can
direct that an investigation of any suspected violation be conducted by
ICC and shall hear any matter referred to it.\212\ Moreover, the
Business Conduct Committee may, as it deems appropriate, establish a
subcommittee of three members (the ``Review Subcommittee''), to receive
and review written investigation reports and written settlement
agreements.\213\
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\209\ Treasury Rule 701.
\210\ Treasury Rules 702 and 703.
\211\ Treasury Rule 702(b).
\212\ Treasury Rule 703(a).
\213\ Treasury Rule 703(c). Treasury Rule 702(d) also allows the
ICC President, Chief Compliance Officer, or another ICC employee
designated by the Board, to conclude that a violation may have
occurred. In that case, the President, Chief Compliance Officer, or
other employee may issue a warning letter or negotiate a written
settlement agreement. A Review Subcommittee of the Business Conduct
Committee must approve the written settlement agreement.
---------------------------------------------------------------------------
Chapter 7 requires that ICC provide notice to a Treasury
Participant during an investigation and potential disciplinary action.
Where a Treasury Participant is the subject of a written report
regarding ICC staff's investigation of a potential violation, ICC staff
must provide the Treasury Participant with a copy of that written
report.\214\ ICC staff must provide the report no less than five
business days prior to distributing the report to the Review
Subcommittee of the Business Conduct Committee. ICC staff must also
give the Treasury Participant an opportunity to submit written comments
regarding or evidence relevant to the report.\215\ Any written comments
received from the Treasury Participant must accompany distribution of
the report to the Review Subcommittee or be furnished to the Review
Subcommittee at or before the time of its meeting, depending on the
date on which the Treasury Participant's comments are received by ICC
staff.\216\
---------------------------------------------------------------------------
\214\ Treasury Rule 702(c).
\215\ Id.
\216\ Id.
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If, after initial review of an investigation report, a Review
Subcommittee concludes that a violation may have occurred, it must
allow the Treasury Participant a reasonable opportunity to prepare and
present evidence.\217\ If the Review Subcommittee then concludes that a
violation may have occurred, the Review Subcommittee must advise the
Treasury Participant of that fact.\218\ The Review Subcommittee may
then (i) refer the matter back to ICC staff for further investigation;
(ii) approve a pre-negotiated settlement agreement; (iii) refer the
matter to a formal hearing of a Hearing Panel; \219\ or (iv) negotiate
and enter into a written settlement agreement on its own.
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\217\ Treasury Rule 703(d).
\218\ Treasury Rule 703(e).
\219\ The Hearing Panel must consist of three members of the
Business Conduct Committee, selected by the Chairman of that
committee, who were not on the Review Subcommittee for the alleged
violation and are not otherwise ineligible.
---------------------------------------------------------------------------
If the Review Subcommittee refers the matter to a formal hearing in
front of a Hearing Panel, then ICC staff must serve a notice on the
Treasury Participant.\220\ The notice must include certain information,
such as the acts in which the Treasury Participant is alleged to have
engaged and how those acts violate ICC's rules or procedures.\221\
Finally, if the Hearing Panel finds that a Treasury Participant
committed an alleged violation, it must issue a written decision to
that effect, and the written decision must include a penalty.\222\
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\220\ Treasury Rule 704.
\221\ Id.
\222\ Treasury Rule 712. The written decision must include
certain information, including a summary of the allegations and a
summary of the Treasury Participant's answer. If the Hearing Panel
finds that a Treasury Participant did not commit an alleged
violation, it must also render a written decision to that effect.
Treasury Rule 712.
---------------------------------------------------------------------------
In addition to the requirements related to informing a Treasury
Participant, Chapter 7 includes other requirements intended to enhance
the fairness of ICC's disciplinary process, such as independence of the
people hearing the matter. As described above, the Business Conduct
Committee must be comprised of ICC's independent Board members.\223\ If
a member of a Review Subcommittee believes he or she has a direct
financial, personal or other interest in the matter under
consideration, the member must notify the Business Conduct Committee,
and the Business Conduct Committee must replace such person on the
Review Subcommittee for that particular matter.\224\ No member of the
Hearing Panel may hear a case in which that member, in the
determination of the Chairman of the Business Conduct Committee, has a
direct financial, personal or other interest in the matter under
consideration.\225\ Finally, Treasury Rule 708 gives Treasury
Participants a means of challenging the inclusion of a member of the
Hearing Panel for cause.
---------------------------------------------------------------------------
\223\ Treasury Rule 703(b).
\224\ Treasury Rule 703(c).
\225\ Treasury Rule 707(c).
---------------------------------------------------------------------------
Throughout the disciplinary process, Treasury Participants may
respond to the investigation and allegations. As described above, if,
after initial review of an investigation report, a Review Subcommittee
concludes that a violation may have occurred, it must allow the
Treasury Participant a reasonable opportunity to prepare and present
evidence.\226\ Treasury Rule 705 gives a Treasury Participant the
ability to serve a written answer on ICC, following service of a
written notice of charges. A Treasury Participant will have an
opportunity for a hearing in front of the Hearing Panel, and during
such hearing the Treasury Participant may, among other things, be
represented by legal counsel or any other representative of its
choosing; present witnesses and documentary evidence; and cross-examine
witnesses.\227\
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\226\ Treasury Rule 702(c).
\227\ Treasury Rules 711 and 712.
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As described, ICC has established procedures to ensure that any
Treasury Participant assessed with a rule violation receives notice of
the alleged violation, and is afforded an opportunity to contest the
allegations, including by requesting a hearing at which the participant
may be represented by counsel. The Treasury Rules address discipline of
Treasury Participants, denial of participation, and prohibitions or
limitations imposed by the clearing agency with respect to access to
services offered by the clearing agency. The Commission therefore
determines that the Treasury Rules provide a fair procedure consistent
with Section 17A(b)(3)(H) of the Exchange Act.
G. Burden on Competition
1. Statutory Standard: Section 17A(b)(3)(I)
Section 17A(b)(3)(I) of the Exchange Act states that a clearing
agency shall not be registered unless the Commission
[[Page 5544]]
determines that the rules of the clearing agency do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Exchange Act.
2. Summary of Application and Analysis
As discussed in Part III.B, ICC's rules permit all of the
participant categories required by Section 17A(b)(3)(B) of the Exchange
Act to be Treasury Participants.\228\ In addition, as contemplated by
Section 17A(b)(4)(B), ICC may deny participation to, or condition the
participation of, a Treasury Participant if the Treasury Participant
does not meet such standards of financial responsibility, operational
capability, experience, and competence as are prescribed by the rules
of ICC.\229\
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\228\ As stated above, one commenter recommended that ICC
explicitly permit FCMs to become Treasury Participants and adjust
its rules to allow FCMs to do so. FIA at 3-5. In response, ICC
explained that Treasury Rule 201(c) is non-exclusive, and ICC may
accept FCMs as Treasury Participants provided that they meet and
maintain the ICC participation standards set out in Treasury Rule
201(b). ICC Response Letter at 3. FCMs are not among the list of the
types of persons listed in Section 17A(b)(3)(B) of the Exchange Act,
and Commission rules do not require a particular access model. A CCA
in the U.S. Treasury market, however, generally should seek to
provide access in as flexible a means as possible, consistent with
its responsibility to provide sound risk management and comply with
other provisions of the Exchange Act, the Covered Clearing Agency
Standards, and other applicable regulatory requirements, and it
generally should consider a wide variety of appropriate means to
facilitate access to clearance and settlement services of all
eligible secondary market transactions in U.S. Treasury securities,
including those of indirect participants. See Release No. 34-99149
(Dec. 13, 2023), 89 FR 2714, 2760 (Jan. 16, 2024).
\229\ See Treasury Rules 201-203.
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Commenters that supported ICC's Application stated that the
inclusion of another clearing agency for the Treasury market would
provide competition and increase resilience and diversity in clearing
models.\230\ One commenter, supporting ICC's Application, stated that
approval will provide needed competition and increase choice for
participants in the Treasury market.\231\ This commenter further stated
that ICC's model will allow Treasury Participants to offer done-away
clearing services in a balance sheet-efficient and operationally
familiar manner, thus offering capital and operational efficiencies and
reducing costs.\232\ The Commission agrees that the inclusion of
another clearing agency for the Treasury market could provide
competition and increase resilience, choice, and diversity in clearing
models.
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\230\ FIA at 1; ISDA at 1.
\231\ AIMA at 2.
\232\ Id.
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More generally, in the context of establishing standards for
participation, ICC's Treasury Rules may impact competition among market
participants by restricting access of its clearing services for market
participants unable to meet its standards for participation; however,
such a burden on competition can be in furtherance of, and consistent
with, the Exchange Act, including Sections 17A(b)(3)(B), 17A(b)(4)(B),
and 17A(b)(3)(F) thereof.\233\ Consistent with Section 17A(b)(4)(B) of
the Exchange Act, for example, ICC may deny participation or condition
participation based on its rules' standards for ``financial
responsibility, operational capability, experience, and competence.''
\234\ Because such participation requirements enable ICC to manage,
mitigate, and, where possible, reduce the risk it faces in its capacity
as a CCP, the Commission determines that ICC's Treasury Rules are not
designed to permit unfair discrimination in the admission of
participants or among participants in the use of the clearing
agency.\235\ Similarly, should ICC's financial and operational
competency standards impact competition, these standards are in the
furtherance of assuring ICC's safeguarding of securities and funds in
ICC's custody or control. Therefore, the Commission determines that
ICC's Treasury Rules do not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\236\
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\233\ 15 U.S.C. 78q-1(b)(3)(B), (b)(4)(B), (b)(3)(F).
\234\ 15 U.S.C. 78q-1(b)(4)(B).
\235\ 15 U.S.C. 78q-1(b)(3)(F).
\236\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
For the reasons discussed above, the Commission finds that ICC
satisfies the requirements for registration as a clearing agency,
including those requirements set forth in Section 17A of the Exchange
Act and Commission rules and regulations thereunder.\237\
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\237\ 15 U.S.C. 78q-1(b)(3).
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It is hereby ordered that the application for registration as a
clearing agency filed by ICE Clear Credit LLC (File No. 600-45)
pursuant to Sections 17A and 19(a) of the Exchange Act be, and hereby
is, approved.
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-02333 Filed 2-5-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on February 6, 2026.
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