ICE adjusts clearing rules ahead of US Treasury clearing rollout

Intercontinental Exchange Clear Credit (ICC) in its submission to the US futures and swaps watchdog on Friday proposed to clarify that its Treasury Rules do not apply to ICC’s credit default swap (CDS) clearing.

“The changes respond to industry feedback received on the Treasury Rules, include certain clarifying or clean-up amendments, and provide for transitory provisions in connection with the launch of the Treasury Clearing Service.”

ICC in its proposals said it does not plan to establish a Treasury Default Committee for the Treasury Clearing Service.

“US Treasury securities are distinct in product type and market structure from credit default swaps and therefore do not require the same default committee framework that was developed specifically for the credit default swap market.”

The clearing house also proposed to amend the rule providing a non-exclusive list of the types of entities that may be approved as Treasury Participants. ICC clarified that Futures Commission Merchants (FCMs) and registered clearing agencies that meet the participation standards as per its rules may also be approved as Treasury Participants.

ICC amended its definition of “Eligible Margin,” for purposes of satisfying an Initial Margin requirement to include "dollars, other assets, or other currencies," aligned with relevant rules which allow US Treasuries to be used to satisfy Initial Margin requirements.

The Chicago-headquartered clearing house submitted related edits to its Treasury Operations Policy and the LRMF to include updating the minimum contribution to the Treasury Guaranty Fund by participants to $10 million (£7.5 million) from $20 million.

ICC said it believes that a lower minimum contribution is appropriate at this stage of the Treasury Clearing Service.

“Under the proposed amendments, the Treasury Guaranty Fund would also continue to support a significant liquidity pool in case of liquidity events, while potentially facilitating broader participation,” the clearing house clarified.

ICC intends to implement the changes no sooner than the tenth business day, following the filing of the submission.

The Georgia-based exchange group in February said it gained the Securities and Exchange Commission (SEC) approvals to launch its US Treasury Clearing Service, opening the way for ICE to create an alternative to the current incumbent, Fixed Income Clearing Corporation.

SEC Commission Mark Uyeda in February said the regulator’s approval of applications from CME Securities Clearing and ICE Clear Credit for Treasury clearing will provide necessary certainty to market participants as to which entities can serve as clearing agencies for Treasury securities.

ICC in February proposed minor revisions to its collateral assets risk management methodology, which sets collateral haircuts and considers price fluctuation risks.