2017-27060

Federal Register, Volume 82 Issue 240 (Friday, December 15, 2017)

[Federal Register Volume 82, Number 240 (Friday, December 15, 2017)]

[Notices]

[Pages 59586-59591]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 2017-27060]

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COMMODITY FUTURES TRADING COMMISSION

Proposed Order and Request for Comment on Application for

Exemption From Certain Provisions of the Commodity Exchange Act

Regarding Investment of Customer Funds and From Certain Related

Commission Regulations

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed order and request for comment.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or

``Commission'') is requesting comment on a proposed exemption issued in

response to an application from ICE Clear Credit LLC, ICE Clear US,

Inc., and ICE Clear Europe Limited (collectively, ``the ICE DCOs'' or

``the Petitioners'') to grant an exemption to permit the investment of

futures and swap customer funds in certain categories of euro-

denominated sovereign debt. The ICE DCOs are also requesting exemptive

relief to expand

[[Page 59587]]

the universe of counterparties and depositories they may use in

connection with these investments given the structure of the market for

repurchase agreements in euro-denominated sovereign debt.

DATES: Comments must be received on or before January 16, 2018.

ADDRESSES: You may submit comments by any of the following methods:

CFTC website: http://comments.cftc.gov. Follow the

instructions for submitting comments through the Comments Online

process on the website.

Mail: Christopher Kirkpatrick, Secretary of the

Commission, Commodity Futures Trading Commission, Three Lafayette

Centre, 1155 21st Street NW, Washington, DC 20581.

Hand Delivery/Courier: Same as Mail, above.

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Please submit your comments using only one of these methods.

All comments must be submitted in English, or if not, accompanied

by an English translation. Comments will be posted as received to

http://www.cftc.gov. You should submit only information that you wish

to make available publicly. If you wish the Commission to consider

information that you believe is exempt from disclosure under the

Freedom of Information Act (``FOIA''), a petition for confidential

treatment of the exempt information may be submitted according to the

established procedures in Commission Regulation 145.9, 17 CFR 145.9.

The Commission reserves the right, but shall have no obligation, to

review, pre-screen, filter, redact, refuse or remove any or all of your

submission from http://www.cftc.gov that it may deem to be

inappropriate for publication, such as obscene language. All

submissions that have been redacted or removed that contain comments on

the merits of this action will be retained in the public comment file

and will be considered as required under the Administrative Procedure

Act and other applicable laws, and may be accessible under the FOIA.

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Deputy Director,

(202) 418-5096, edonovan@cftc.gov, Division of Clearing and Risk,

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

Street NW, Washington, DC 20581; or Tad Polley, Associate Director,

(312) 596-0551, tpolley@cftc.gov, or Scott Sloan, Attorney-Advisor,

(312) 596-0708, ssloan@cftc.gov, Division of Clearing and Risk,

Commodity Futures Trading Commission, 525 West Monroe Street, Chicago,

Illinois 60661.

SUPPLEMENTARY INFORMATION:

I. Background

By application dated June 22, 2017, the Petitioners, all registered

derivatives clearing organizations (``DCOs''), requested an exemptive

order under section 4(c) of the Commodity Exchange Act (``CEA'' or

``Act'') permitting the ICE DCOs to invest futures and cleared swap

customer funds in certain categories of euro-denominated sovereign

debt.

Section 4d of the Act \1\ and Commission Regulation 1.25(a) \2\ set

out the permitted investments in which DCOs may invest customer

funds.\3\ Section 4d limits investments of customer money to

obligations of the United States (``U.S. Government Securities''),

general obligations of any State or of any political subdivision

thereof, and obligations fully guaranteed as to principal and interest

by the United States.\4\ Regulation 1.25 expands the list of permitted

investments but does not permit investment of customer funds in foreign

sovereign debt.\5\

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\1\ 7 U.S.C. 6d.

\2\ 17 CFR 1.25(a) (2017).

\3\ Although Regulation 1.25 by its terms applies only to

futures customer funds, Regulation 22.3(d) requires that a DCO

investing cleared swap customer funds comply with the requirements

of Regulation 1.25.

\4\ See 7 U.S.C. 6d(a)(2) (futures), (f)(4) (cleared swaps).

\5\ Regulation 1.25 permits investment of customer funds in: (i)

Obligations of the United States and obligations fully guaranteed as

to principal and interest by the United States (U.S. government

securities); (ii) General obligations of any State or of any

political subdivision thereof (municipal securities); (iii)

Obligations of any United States government corporation or

enterprise sponsored by the United States government (U.S. agency

obligations); (iv) Certificates of deposit issued by a bank

(certificates of deposit) as defined in section 3(a)(6) of the

Securities Exchange Act of 1934, or a domestic branch of a foreign

bank that carries deposits insured by the Federal Deposit Insurance

Corporation; (v) Commercial paper fully guaranteed as to principal

and interest by the United States under the Temporary Liquidity

Guarantee Program as administered by the Federal Deposit Insurance

Corporation (commercial paper); (vi) Corporate notes or bonds fully

guaranteed as to principal and interest by the United States under

the Temporary Liquidity Guarantee Program as administered by the

Federal Deposit Insurance Corporation (corporate notes or bonds);

and (vii) Interests in money market mutual funds.

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Regulation 1.25 previously included foreign sovereign debt as a

permitted investment for customer funds.\6\ In 2011, the Commission

removed this option from Regulation 1.25, but also acknowledged that

``the safety of sovereign debt issuances of one country may vary

greatly from those of another,'' and stated that it was amenable to

considering requests for section 4(c) exemptions from this

restriction.\7\ Specifically, the Commission stated that it would

consider permitting foreign sovereign debt investments (1) to the

extent that the petitioner has balances in segregated accounts owed to

customers or clearing member futures commission merchants in that

country's currency and (2) to the extent that the sovereign debt serves

to preserve principal and maintain liquidity of customer funds as

required for all other investments of customer funds under Regulation

1.25.\8\

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\6\ See 17 CFR 1.25(a) (2005).

\7\ Investment of Customer Funds and Funds Held in an Account

for Foreign Futures and Foreign Options Transactions, 76 FR 78776,

78782 (Dec. 19, 2011).

\8\ Id.

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In connection with their proposal to invest customer funds in

foreign sovereign debt, the ICE DCOs have also requested an exemption

from Regulations 1.25(d)(2) and (7). Regulation 1.25(d)(2) limits the

counterparties with which a DCO can enter into a repurchase agreement

involving customer funds to a bank as defined in section 3(a)(6) of the

Securities Exchange Act of 1934, a domestic branch of a foreign bank

insured by the Federal Deposit Insurance Corporation, a securities

broker or dealer, or a government securities broker or government

securities dealer registered with the Securities and Exchange

Commission or which has filed notice pursuant to section 15C(a) of the

Government Securities Act of 1986. Regulation 1.25(d)(7) requires a DCO

to hold the securities transferred to the DCO under a repurchase

agreement in a safekeeping account with a bank as referred to in

Regulation 1.25(d)(2), a Federal Reserve Bank, a DCO, or the Depository

Trust Company in an account that complies with the requirements of

Regulation 1.26.

II. The ICE DCOs' Petition

The ICE DCOs specifically seek to invest euro-denominated customer

funds in sovereign debt issued by the French Republic and the Federal

Republic of Germany (``Designated Foreign Sovereign Debt'') through

both direct investment and repurchase agreements.\9\ In the petition,

the ICE DCOs argue that French and German sovereign debt is comparable

to U.S. Government Securities in terms of

[[Page 59588]]

creditworthiness, liquidity, and volatility. The Petitioners note that

facing the credit risk of these financially stable sovereigns is

preferable from a risk management perspective to holding euro at a

commercial bank. In the case of investments through reverse repurchase

agreements (as opposed to direct investments), the ICE DCOs still face

a commercial counterparty but receive the additional benefit of

receiving securities as collateral against that counterparty's credit

risk. The ICE DCOs have also represented that in the event a securities

custodian enters insolvency proceedings, they would have a claim to

specific securities rather than a general claim against the assets of

the custodian.

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\9\ A copy of the petition is available on the Commission's

website at http://www.cftc.gov/idc/groups/public/@requestsandactions/documents/ifdocs/icedcos4cappl6-22-17.pdf.

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The Petitioners further request an exemption from Regulation

1.25(d)(2) that would permit them to enter into reverse repurchase

agreements with certain foreign banks, certain regulated securities

dealers, or the European Central Bank and the central banks of Germany

and France.\10\ The ICE DCOs have represented that the principal

participants in the European sovereign debt repurchase markets are non-

U.S. banks, non-U.S. securities dealers, and foreign branches of U.S.

banks. As a result, the counterparty requirements under Regulation

1.25(d)(2) would significantly constrain the use of euro-denominated

sovereign debt repurchase agreements.

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\10\ The ICE DCOs have indicated they may not currently be able

to enter into repurchase agreements with these central banks.

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The ICE DCOs also request an exemption from Regulation 1.25(d)(7)

that would permit them to hold the securities purchased through reverse

repurchase agreements in a safekeeping account with a non-U.S. bank.

The ICE DCOs seek this exemption based on their representation that it

is impractical and inefficient to hold such securities at a U.S.

custodian. Rather than seeking an open-ended exemption from Regulation

1.25(d)(7), the ICE DCOs propose that they be permitted to only use a

foreign bank that qualifies as a depository under the requirements of

Regulation 1.49.

III. Section 4(c) of the Act

Section 4(c)(1) of the Act empowers the Commission to ``promote

responsible economic or financial innovation and fair competition'' by

exempting any transaction or class of transactions (including any

person or class of persons offering, entering into, rendering advice or

rendering other services with respect to, the agreement, contract, or

transaction), from any of the provisions of the Act, subject to

exceptions not relevant here.\11\ In enacting section 4(c), Congress

noted that its goal ``is to give the Commission a means of providing

certainty and stability to existing and emerging markets so that

financial innovation and market development can proceed in an effective

and competitive manner''.\12\ The Commission may grant such an

exemption by rule, regulation, or order, after notice and opportunity

for hearing, and may do so on application of any person or on its own

initiative.

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\11\ 7 U.S.C. 6(c)(1).

\12\ House Conf. Report No. 102-978, 1992 U.S.C.C.A.N. 3179,

3213.

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Section 4(c)(2) of the Act provides that the Commission may grant

exemptions under section 4(c)(1) only when it determines that the

requirements for which an exemption is being provided should not be

applied to the agreements, contracts, or transactions at issue; that

the exemption is consistent with the public interest and the purposes

of the Act; that the agreements, contracts, or transactions will be

entered into solely between appropriate persons; and that the exemption

will not have a material adverse effect on the ability of the

Commission or any contract market or derivatives transaction execution

facility to discharge its regulatory or self-regulatory

responsibilities under the Act.

IV. Order

A. Discussion of the Proposed Order

The Commission is proposing to permit the ICE DCOs to invest

futures and cleared swap customer funds in sovereign debt issued by the

French Republic and the Federal Republic of Germany, through either

direct investment or repurchase agreements, pursuant to an exemption

under section 4(c) of the Act. The Commission is proposing the order

below, which includes certain conditions on the permitted investments,

in response to the ICE DCOs' argument that permitting investment in the

Designated Foreign Sovereign Debt furthers responsible risk management.

Based on the analysis below, the Commission has preliminarily

determined that the exemption provided in the proposed order meets the

requirements of section 4(c)(2) of the Act, including in that it is

consistent with the public interest and the purposes of the Act, and in

that it will not have a material adverse effect on the ability of the

Commission to discharge its regulatory responsibilities.

Through their petition, the ICE DCOs have demonstrated that the

Designated Foreign Sovereign Debt has credit, liquidity, and volatility

characteristics that are comparable to U.S. Government Securities,

which are permitted investments under the Act and Regulation 1.25. For

example, as evidence of the creditworthiness of France and Germany, the

ICE DCOs provided data demonstrating that credit default swap spreads

of France and Germany have historically been similar to those of the

United States. To demonstrate the liquidity of the markets, the ICE

DCOs point to, for example, the substantial amount of outstanding

marketable French and German debt and the daily transaction value of

the repo markets for their debt. And with respect to volatility, the

ICE DCOs provided data on daily changes to sovereign debt yields

demonstrating that the price stability of French and German debt is

comparable to that of U.S. Government Securities. The ICE DCOs have

thus argued that the Designated Sovereign Debt serves to preserve

principle and maintain liquidity of customer funds as is required for

investments permitted under Regulation 1.25. To ensure that permitted

investments are limited to those with an appropriate risk profile, the

proposed order limits investments in Designated Foreign Sovereign Debt

to instruments of a shorter duration, as is discussed below.

Further, the ICE DCOs have demonstrated that investing in the

Designated Foreign Sovereign Debt poses less risk to customer funds

than the current alternative of holding the funds at a commercial bank,

arguing that exposure to high-quality sovereign debt is preferable to

facing the credit risk of commercial banks through unsecured bank

demand deposit accounts. And finally, the Commission does not believe

that any of the section 4(c)(2) exceptions would prevent a grant of the

requested exemption.

The Commission is also proposing certain conditions to the

exemption, including that the ICE DCOs may only use customer euro cash

to invest in the Designated Foreign Sovereign Debt. This restriction

was included in Regulation 1.25 \13\ when the rule permitted the

investment of customer funds in foreign sovereign debt, and the

Commission believes it is still an appropriate

[[Page 59589]]

restriction on the amount that may be invested in these instruments.

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\13\ See 17 CFR 1.25(b)(4)(D) (2005) (providing that sovereign

debt is subject to the following limits: A futures commission

merchant may invest in the sovereign debt of a country to the extent

it has balances in segregated accounts owed to its customers

denominated in that country's currency; a DCO may invest in the

sovereign debt of a country to the extent it has balances in

segregated accounts owed to its clearing member futures commission

merchants denominated in that country's currency).

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The Commission is further proposing to permit the ICE DCOs to

invest in the Designated Foreign Sovereign Debt only so long as the

two-year credit default spread of the issuing sovereign is 45 basis

points (``BPS'') or less. Because the Commission does not intend in

this proposed order to expand the universe of permitted investments

beyond instruments with a risk profile similar to those that are

currently permitted, the Commission believes it is appropriate to use

U.S. Government Securities as a benchmark to confine permitted

investments in foreign sovereign debt. The Commission is proposing the

cap of 45 BPS based on a historical analysis of the two-year credit

default spread of the United States (``U.S. Spread''). Forty-five BPS

is approximately two standard deviations above the mean U.S. Spread

over the past eight years and represents a risk level that the U.S.

Spread has exceeded approximately 5% of the time over that period.\14\

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\14\ The Commission reviewed the daily U.S. Spread from July 3,

2009 to July 3, 2017. Over this time period, the U.S. Spread had a

mean of approximately 26.5 BPS and a standard deviation of

approximately 9.72 BPS. Over this same period, the two-year German

spread exceeded 45 BPS approximately 6% of the time, and the two-

year French spread exceeded 45 BPS approximately 25% of the time.

Neither the German nor the French two-year spread has exceeded 45

BPS since September 2012.

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Under the proposal, if the spread exceeds 45 BPS, the ICE DCOs

would not be permitted to make new investments in the relevant debt.

They would not, however, be required to immediately divest all current

investments, due to risks associated with selling assets into a

potentially volatile market. The Commission believes that prohibiting

new investments, together with the length to maturity condition

discussed immediately below, will sufficiently protect customer funds

in the event that a country's Designated Foreign Sovereign Debt were to

exceed the 45 BPS spread limit.

The Commission is also proposing to limit the length to maturity of

direct investments in Designated Foreign Sovereign Debt, to limit

permitted investments to those with a lower risk profile. Specifically,

the proposed order requires each of the ICE DCOs to ensure that the

dollar-weighted average of the time-to-maturity of their portfolio of

direct investments in each type of Designated Foreign Sovereign Debt

does not exceed 60 days. This restriction is consistent with Securities

and Exchange Commission requirements for money market mutual funds \15\

and ensures that the ICE DCOs will not hold Designated Foreign

Sovereign Debt investments on a long-term basis, and that the

investments will mature relatively quickly, providing the ICE DCOs with

access to euro cash. The Commission believes that the liquidity timing

needs of money market mutual funds are an appropriate analogue to those

of a DCO in this instance and that the 60-day time-to-maturity limit

will further limit the risks of investments in Designated Foreign

Sovereign Debt.

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\15\ See 17 CFR 270.2a-7.

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To provide the ICE DCOs with the ability to invest customer funds

in the Designated Foreign Sovereign Debt, the Commission is also

proposing to exempt the ICE DCOs from the counterparty and depository

requirements of Regulation 1.25(d)(2) and (7), subject to conditions.

As a practical matter, complying with these requirements would severely

restrict the ICE DCOs' ability to enter into repurchase agreements for

Designated Foreign Sovereign Debt. As a result, the Commission proposes

to exempt the ICE DCOs from the counterparty restrictions of Regulation

1.25(d)(2), subject to the condition that counterparties be limited to

certain categories that are intended to limit the risk associated with

reverse repurchase transactions. Similarly, the Commission is proposing

to condition the ICE DCOs' exemption from Regulation 1.25(d)(7) on its

use of depositories that qualify as permitted depositories under

Regulation 1.49. This approach is designed to ensure that the

counterparties and depositories used by the ICE DCOs will be regulated

entities comparable to those currently permitted under Regulation

1.25(d)(2) and (7).

B. Proposed Order

The Commission proposes an exemptive order that includes the

following substantive provisions:

(1) The Commission, pursuant to its authority under section 4(c) of

the Commodity Exchange Act (``Act'') and subject to the conditions

below, hereby grants registered derivatives clearing organizations

(``DCOs'') ICE Clear Credit LLC, ICE Clear US Inc., and ICE Clear

Europe Limited (``ICE DCOs'') a limited exemption to section 4d of the

Act and to Commission Regulation 1.25(a) to permit the ICE DCOs to

invest euro-denominated futures and cleared swap customer funds in

euro-denominated sovereign debt issued by the French Republic and the

Federal Republic of Germany (``Designated Foreign Sovereign Debt'').

(2) The Commission, subject to the conditions below, additionally

grants:

(a) A limited exemption to Commission Regulation 1.25(d)(2) to

permit the ICE DCOs to use customer funds to enter into repurchase

agreements with foreign banks and foreign securities brokers or

dealers; and

(b) A limited exemption to Commission Regulation 1.25(d)(7) to

permit the ICE DCOs to hold securities purchased under a repurchase

agreement in a safekeeping account at a foreign bank.

(3) This order is subject to the following conditions:

(a) Investments of customer funds in Designated Foreign Sovereign

Debt by each ICE DCO must be limited to investments made with euro

customer cash.

(b) The ICE DCOs may only invest customer funds in Designated

Foreign Sovereign Debt if the two-year credit default spread of the

issuing sovereign is 45 basis points or less.

(c) The dollar-weighted average of the time-to-maturity of each ICE

DCO's portfolio of direct investments in each sovereign's Designated

Foreign Sovereign Debt may not exceed 60 days. Direct investment refers

to purchases of Designated Foreign Sovereign Debt unaccompanied by a

contemporaneous agreement to resell the securities.

(d) The ICE DCOs may use customer funds to enter into repurchase

agreements for Designated Foreign Sovereign Debt with a counterparty

that does not meet the requirements of Commission Regulation 1.25(d)(2)

only if the counterparty is:

(i) A foreign bank that qualifies as a permitted depository under

Commission Regulation 1.49(d)(3) and that is located in a money center

country (as defined in Commission Regulation 1.49(a)(1)) or in another

jurisdiction that has adopted the euro as its currency;

(ii) A securities dealer located in a money center country as

defined in Commission Regulation 1.49(a)(1) that is regulated by a

national financial regulator such as the UK Prudential Regulation

Authority or Financial Conduct Authority, the German Bundesanstalt

f[uuml]r Finanzdienstleistungsaufsicht (BaFin), the French

Autorit[eacute] Des March[eacute]s Financiers (AMF) or Autorit[eacute]

de Contr[ocirc]le Prudentiel et de R[eacute]solution (ACPR), or the

Italian Commissione Nazionale per le Societ[agrave] e la Borsa

(CONSOB); or

(iii) The European Central Bank, the Deutsche Bundesbank, or the

Banque de France.

(e) The ICE DCOs may hold customer securities purchased under a

repurchase

[[Page 59590]]

agreement with a depository that does not meet the requirements of

Commission Regulation 1.25(d)(7) only if the depository meets the

location and qualification requirements contained in Commission

Regulation 1.49(c) and (d) and if the account complies with the

requirements of Commission Regulation 1.26.

(4) The ICE DCOs must continue to comply with all other

requirements in Commission Regulation 1.25, including but not limited

to the counterparty concentration limits in Commission Regulation

1.25(b)(3)(v), and other applicable Commission regulations.

V. Request for Comment

The Commission requests comment on all aspects of Petitioners'

exemption request, including the specific provisions and issues

highlighted in the discussion above and the issues presented in this

section. For each comment submitted, please provide a detailed

rationale supporting the response.

The purposes of the CEA include ``promot[ing] responsible

innovation and fair competition among boards of trade, other markets,

and market participants''.\16\ It may be consistent with these and the

other purposes of the CEA, and with the public interest, to grant the

exemption requested by the Petitioners. Accordingly, the Commission is

requesting comment as to whether an exemption from the requirements of

the CEA should be granted in this context. The Commission also is

requesting comment as to whether this exemption would affect its

ability to discharge its regulatory responsibilities under the CEA.

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\16\ Section 3(b) of the CEA, 7 U.S.C. 5(b). See also Section

4(c)(1) of the CEA, 7 U.S.C. 6(c)(1) (purpose of exemptions is ``to

promote responsible economic or financial innovation and fair

competition'').

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VI. Related Matters

A. Paperwork Reduction Act

The Paperwork Reduction Act (``PRA'') imposes certain requirements

on federal agencies (including the Commission) in connection with their

conducting or sponsoring any collection of information as defined by

the PRA. This exemptive order does not involve a collection of

information. Accordingly, the PRA does not apply.

B. Cost-Benefit Analysis

Section 15(a) of the CEA requires the Commission to consider the

costs and benefits of its action before issuing an order under the CEA.

By its terms, section 15(a) does not require the Commission to quantify

the costs and benefits of an order or to determine whether the benefits

of the order outweigh its costs. Rather, section 15(a) simply requires

the Commission to ``consider the costs and benefits'' of its action.

1. Baseline for the Proposal

The Commission's proposed baseline for consideration of the costs

and benefits of the proposed exemptive order are the costs and benefits

that the ICE DCOs and the public would face if the Commission does not

grant the order, or in other words, the status quo. In that scenario,

the ICE DCOs would be limited to investing customer funds in the

instruments listed in Regulation 1.25.

2. Costs and Benefits

The costs and benefits of the proposed order are not presently

susceptible to meaningful quantification. Therefore, the Commission

discusses proposed costs and benefits in qualitative terms.

The Commission does not believe granting the exemption would impose

additional costs on the ICE DCOs. The proposed order would permit but

not require the Petitioners to invest customer funds in Designated

Foreign Sovereign Debt. The ICE DCOs may therefore choose whether to

accept any costs and benefits of an investment. The Commission also

does not expect the proposed order to impose additional costs on other

market participants or the public, which do not face any direct costs

from the proposed order. While other market participants or the public

could potentially face costs from riskier investment activity leading

to financial instability at an ICE DCO, the flexibility to hold

customer funds in Designated Foreign Sovereign Debt rather than in euro

cash at a commercial bank provides risk management benefits as

described above.

The Commission believes that the ICE DCOs would benefit from the

proposed order. The exemption would provide the ICE DCOs additional

flexibility in how they manage and hold customer funds and would allow

them to improve the risk management of their customer accounts.

Further, as described above, it is safer from a risk management

perspective to hold Foreign Sovereign Debt in a safekeeping account

than to hold euro cash at a commercial bank. Therefore, market

participants and the public may also benefit from the proposed

exemption.

3. Section 15(a) Factors

Section 15(a) of the CEA further specifies that costs and benefits

shall be evaluated in light of five broad areas of market and public

concern: Protection of market participants and the public; efficiency,

competitiveness, and financial integrity of futures markets; price

discovery; sound risk management practices; and other public interest

considerations. The Commission could in its discretion give greater

weight to any one of the five enumerated areas and could in its

discretion determine that, notwithstanding its costs, a particular

order was necessary or appropriate to protect the public interest or to

effectuate any of the provisions or to accomplish any of the purposes

of the CEA. The Commission is considering the costs and benefits of

this exemptive order in light of the specific provisions of section

15(a) of the CEA, as follows:

1. Protection of market participants and the public. As described

above, investing in the Designated Foreign Sovereign Debt as requested

by the Petitioners can provide risk management benefits relative to the

current alternative of holding euro collateral in a commercial bank.

Granting the exemption thus serves to protect market participants and

the public.

2. Efficiency, competition, and financial integrity. Granting the

exemption may increase efficiency by providing the Petitioners

additional flexibility in how they manage customer funds. Making the

investments permitted by the proposed order is elective, within the

discretion of the ICE DCOs, and thus does not impose additional costs.

Further, as discussed above, the ICE DCOs plan to exercise prudent risk

management by investing in the Designated Foreign Sovereign Debt, which

may enhance the financial integrity of the ICE DCOs.

3. Price discovery. The exemption is unlikely to impact price

discovery.

4. Sound risk management practices. As described above, the ICE

DCOs' plan to invest customer funds in the Designated Foreign Sovereign

Debt is intended to advance sound risk management practices.

5. Other public interest considerations. The Commission believes

that the relevant cost-benefit considerations are captured in the four

factors above.

The Commission invites public comment on its application of the

cost-benefit provisions of section 15.

[[Page 59591]]

Issued in Washington, DC, on December 12, 2017, by the

Commission.

Christopher J. Kirkpatrick,

Secretary of the Commission.

Appendix to Proposed Order and Request for Comment on Application for

Exemption From Certain Provisions of the Commodity Exchange Act

Regarding Investment of Customer Funds and From Certain Related

Commission Regulations--Commission Voting Summary

On this matter, Chairman Giancarlo and Commissioners Quintenz

and Behnam voted in the affirmative. No Commissioner voted in the

negative.

[FR Doc. 2017-27060 Filed 12-14-17; 8:45 am]

BILLING CODE 6351-01-P

 

 

Last Updated: December 15, 2017