[Federal Register Volume 75, Number 232 (Friday, December 3, 2010)]
[Notices]
[Pages 75502-75518]
[FR Doc No: 2010-30373]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63387; File No. S7-05-09]

Order Extending and Modifying Temporary Exemptions Under the
Securities Exchange Act of 1934 in Connection With Request of Ice Trust
U.S. LLC Related to Central Clearing of Credit Default Swaps and
Request for Comment

November 29, 2010.

I. Introduction

    The Securities and Exchange Commission (``Commission'') has taken
multiple actions designed to help foster the prompt development of
credit default swap (``CDS'') central counterparties (``CCP''),
including granting temporary conditional exemptions from certain
provisions of the Federal securities laws.\1\
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    \1\ See generally Securities Exchange Act Release Nos. 60372
(Jul. 23, 2009), 74 FR 37748 (Jul. 29, 2009) and 61973 (Apr. 23,
2010), 75 FR 22656 (Apr. 29, 2010) (temporary exemptions in
connection with CDS clearing by ICE Clear Europe Limited);
Securities Exchange Act Release Nos. 60373 (Jul. 23, 2009), 74 FR
37740 (Jul. 29, 2009) and 61975 (Apr. 23, 2010), 75 FR 22641 (Apr.
29, 2010) (temporary exemptions in connection with CDS clearing by
Eurex Clearing AG); Securities Exchange Act Release Nos. 59578 (Mar.
13, 2009), 74 FR 11781 (Mar. 19, 2009), 61164 (Dec. 14, 2009), 74 FR
67258 (Dec. 18, 2009), and 61803 (Mar. 30, 2010), 75 FR 17181 (Apr.
5, 2010) (temporary exemptions in connection with CDS clearing by
Chicago Mercantile Exchange Inc.); Securities Exchange Act Release
Nos. 59527 (Mar. 6, 2009), 74 FR 10791 (Mar. 12, 2009) (``March 2009
ICE Trust Exemptive Order''), 61119 (Dec. 4, 2009), 74 FR 65554
(Dec. 10, 2009) (``December 2009 ICE Trust Exemptive Order''), and
61662 (Mar. 5, 2010), 75 FR 11589 (Mar. 11, 2010) (``March 2010 ICE
Trust Exemptive Order,'' and together with the March 2009 ICE Trust
Exemptive Order and December 2009 ICE Trust Exemptive Order the
``ICE Trust Exemptive Orders'') (temporary exemptions in connection
with CDS clearing by ICE Trust U.S. LLC); Securities Exchange Act
Release No. 59164 (Dec. 24, 2008), 74 FR 139 (Jan. 2, 2009)
(temporary exemptions in connection with CDS clearing by LIFFE A&M
and LCH.Clearnet Ltd.); and other Commission actions discussed in
several of these orders. In addition, the Commission has issued
interim final temporary rules that provide exemptions under the
Securities Act of 1933 and the Securities Exchange Act of 1934 for
CDS to facilitate the operation of one or more central
counterparties for the CDS market. See Securities Act Release Nos.
8999 (Jan. 14, 2009), 74 FR 3967 (Jan. 22, 2009) (initial approval),
9063 (Sep. 14, 2009), 74 FR 47719 (Sep. 17, 2009) (extension until
Nov. 30, 2010), and 9158 (Nov. 30, 2010) (extension until Jul. 16,
2011).

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    In March 2009, the Commission issued an order providing temporary
conditional exemptions to ICE Trust U.S. LLC (``ICE Trust''), and
certain other parties, to permit ICE Trust to clear and settle CDS
transactions.\2\ In response to ICE Trust's request, the Commission
temporarily extended and expanded the exemptions in December 2009 and
in March 2010.\3\ The current exemptions pursuant to the March 2010 ICE
Trust Exemptive Order are scheduled to expire on November 30, 2010, and
ICE Trust has requested that the Commission extend and modify the
exemptions contained in the March 2010 ICE Trust Exemptive Order.\4\
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    \2\ Securities Exchange Act Release No. 59527 (Mar. 6, 2009), 74
FR 10791 (Mar. 12, 2009).
    \3\ Securities Exchange Act Release Nos. 61119 (Dec. 4, 2009),
74 FR 65554 (Dec. 10, 2009) and 61662 (Mar. 5, 2010), 75 FR 11589
(Mar. 11, 2010).
    \4\ See Letter from Kevin McClear, ICE Trust, to Elizabeth
Murphy, Secretary, Commission, Nov. 29, 2010 (``November 2010
Request'').
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    The Commission's current authority over the OTC market for CDS is
limited.\5\ Specifically, Section 3A of the Securities Exchange Act of
1934 (``Exchange Act'') limits the Commission's authority over swap
agreements, as defined in Section 206A of the Gramm-Leach-Bliley
Act.\6\ For those CDS that are swap agreements, the exclusion from the
definition of security in Section 3A of the Exchange Act, and related
provisions, will continue to apply. The Commission's action today does
not affect these CDS, and this Order does not apply to them. For those
CDS that are not swap agreements (``non-excluded CDS''), the
Commission's action today provides temporary conditional exemptions
from certain requirements of the Exchange Act.
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    \5\ Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (``Dodd-Frank Act'') addresses limitations on
the Commission's current authority in this area. As discussed in
Part II.A infra, provisions of Title VII of the Dodd-Frank Act
generally become effective on July 16, 2011.
    \6\ 15 U.S.C. 78c-1. Section 3A excludes both a non-security-
based and a security-based swap agreement from the definition of
``security'' under Section 3(a)(10) of the Exchange Act, 15 U.S.C.
78c(a)(10). Section 206A of the Gramm-Leach-Bliley Act defines a
``swap agreement'' as ``any agreement, contract, or transaction
between eligible contract participants (as defined in section 1a(12)
of the Commodity Exchange Act * * *) * * * the material terms of
which (other than price and quantity) are subject to individual
negotiation.'' 15 U.S.C. 78c note.
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II. Discussion

A. Legislative Developments

    Subsequent to the Commission's issuance of the March 2010 ICE Trust
Exemptive Order, the President signed the Dodd-Frank Act into law.\7\
The Dodd-Frank Act was enacted to, among other purposes, promote the
financial stability of the United States by improving accountability
and transparency in the financial system.\8\ To this end, the
provisions of Title VII of the Dodd-Frank Act provide for the
comprehensive regulation of security-based swaps \9\ by the
Commission.\10\ The Dodd-Frank Act amends the Exchange Act to require,
among other things, that transactions in security-based swaps be
cleared through a clearing agency that is registered with the
Commission or that is exempt from registration if they are of a type
that the Commission determines must be cleared, unless an exception or
exemption from mandatory clearing applies.\11\ Furthermore, Title VII
of the Dodd-Frank Act provides that a depository institution that
cleared swaps as a multilateral clearing organization prior to the date
of enactment of the Dodd-Frank Act, such as ICE Trust, is deemed
registered as a clearing agency for the purposes of clearing security-
based swaps (``Deemed Registered Provision'').\12\ The Deemed
Registered Provision, along with other general provisions under Title
VII of the Dodd-Frank Act, becomes effective on July 16, 2011.\13\ As a
result, ICE Trust will no longer need the exemption from registration
as a clearing agency under Section 17A of the Exchange Act provided by
the March 2010 ICE Trust Exemptive Order, and previous orders, to clear
security-based swaps after the Deemed Registered Provision becomes
effective.
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    \7\ Public Law 111-203 (July 21, 2010).
    \8\ See Public Law 111-203, Preamble.
    \9\ Section 761(a)(6) of the Dodd-Frank Act defines a
``security-based swap'' as any agreement, contract, or transaction
that is a ``swap,'' as defined in Section 1a(47) of the Commodity
Exchange Act (``CEA''), 7 U.S.C. 1a(47), that is based on an index
that is a narrow-based security index, including any interest
therein or on the value thereof; a single security, or a loan,
including any interest therein or on the value thereof; or the
occurrence, nonoccurrence, or extent of the occurrence of an event
relating to a single issuer of a security or the issuers of
securities in a narrow-based security index, provided that such
event directly affects the financial statements, financial
condition, or financial obligations of the issuer. See Section
3(a)(68) of the Exchange Act, 15 U.S.C.78c(a)(68) (as added by
Section 761(a)(6) of the Dodd-Frank Act). Section 712(d) of the
Dodd-Frank Act provides that the Commission and the Commodity
Futures Trading Commission (``CFTC''), in consultation with the
Board of Governors of the Federal Reserve System (``Federal Reserve
Board''), shall, among other things, jointly further define the
terms ``swap'' and ``security-based swap.'' The Commission and the
CFTC will jointly propose a rule to further define these terms,
including with respect to credit default swaps.
    \10\ Section 761(a)(2) of the Dodd-Frank Act explicitly includes
security-based swaps in the definition of ``security'' in Section
3(a)(10) of the Exchange Act, 15 U.S.C. 78c.
    \11\ See Section 763(a) of the Dodd-Frank Act (adding new
Section 3C(a)(1) to the Exchange Act, 15 U.S.C. 78c-2).
    \12\ See Section 763(b) of the Dodd-Frank Act (adding new
Section 17A(l) to the Exchange Act, 15 U.S.C. 78q-1(1)). Under this
Deemed Registered Provision, ICE Trust will be required to comply
with all requirements of the Exchange Act, and the rules thereunder,
applicable to registered clearing agencies to the extent it clears
security-based swaps after the effective date of the Deemed
Registered Provision, including, for example, the obligation to file
proposed rule changes under Section 19(b) of the Exchange Act.
    \13\ Section 774 of the Dodd-Frank Act states, ``[u]nless
otherwise provided, the provisions of this subtitle shall take
effect on the later of 360 days after the date of the enactment of
this subtitle or, to the extent a provision of this subtitle
requires a rulemaking, not less than 60 days after publication of
the final rule or regulation implementing such provision of this
subtitle.''
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B. ICE Trust's Request for Extension of March 2010 ICE Trust Exemptive
Order

    ICE Trust seeks an extension of the relief provided by the March
2010 ICE Trust Exemptive Order, as modified herein.\14\ In ICE Trust's
request for an extension of the March 2010 ICE Trust Exemptive Order,
ICE Trust represents that there have been no material changes to the
operations of ICE Trust, and that the representations made by ICE Trust
in connection with the March 2010 ICE Trust Exemptive Order remain true
in all material respects.\15\ These representations are discussed in
detail in our earlier ICE Trust orders.
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    \14\ See November 2010 Request, supra note 6.
    \15\ See id. ICE Trust indicated in its November 2010 Request
Letter that it intends to apply to the CFTC for registration as a
derivatives clearing organization in advance of the date Title VII
of the Dodd-Frank Act goes into effect in order to facilitate
implementation of the Dodd-Frank Act requirements. As part of the
transition to derivatives clearing organization status, ICE Trust
expects to admit futures commission merchants registered with the
CFTC (which may be registered broker-dealers) as clearing members
for customer clearing and may introduce related changes to its
rules. See Part II.G, infra.
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    Accordingly, consistent with our findings in the March 2010 ICE
Trust Exemptive Order, and, in particular, in light of the risk
management and systemic benefits in continuing to facilitate CDS
clearing by ICE Trust until Title VII of the Dodd-Frank Act becomes
fully effective, the Commission finds that it is necessary or
appropriate in the public interest and is consistent with the
protection of investors to exercise its authority to extend and modify
the exemptive relief granted in the March 2010 ICE Trust Exemptive
Order until July 16, 2011. Specifically, pursuant to the Commission's
authority under Section 36 of the Exchange Act,\16\

based on the facts presented and the representations made by ICE
Trust,\17\ and for the reasons discussed in this Order and subject to
certain conditions, the Commission is extending, subject to the
modifications discussed in this Order, each of the existing exemptions
connected with CDS clearing by ICE Trust, which include: The temporary
conditional exemption granted to ICE Trust from clearing agency
registration under Section 17A of the Exchange Act solely to perform
the functions of a clearing agency for certain non-excluded CDS; the
temporary conditional exemption of ICE Trust and certain of its
clearing members from the registration requirements of Sections 5 and 6
of the Exchange Act solely in connection with the calculation of mark-
to-market prices for certain non-excluded CDS cleared by ICE Trust; the
temporary conditional exemption of certain eligible contract
participants and others from certain Exchange Act requirements with
respect to certain non-excluded CDS cleared by ICE Trust; the temporary
conditional exemption of ICE Trust clearing members and certain others
from broker-dealer registration requirements and related requirements
in connection with CDS clearing by ICE Trust (including clearing of
customer CDS transactions); and the temporary conditional exemption
from certain Exchange Act requirements granted to registered broker-
dealers with respect to certain non-excluded CDS.
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    \16\ 15 U.S.C. 78mm. Section 36 of the Exchange Act authorizes
the Commission to conditionally or unconditionally exempt any
person, security, or transaction, or any class or classes of
persons, securities, or transactions, from any provision or
provisions of the Exchange Act or any rule or regulation thereunder,
by rule, regulation, or order, to the extent that such exemption is
necessary or appropriate in the public interest, and is consistent
with the protection of investors.
    \17\ See November 2010 Request, supra note 6. The exemptions we
are granting today are based on all of the representations made by
ICE Trust in its request, which incorporate representations made by
ICE Trust in connection with the March 2010 ICE Trust Exemptive
Order, which in turn incorporates representations related to our
earlier exemptive orders. We recognize, however, that there could be
legal uncertainty in the event that one or more of the underlying
representations were to become inaccurate. Accordingly, if any of
these exemptions were to become unavailable by reason of an
underlying representation no longer being materially accurate, the
legal status of existing open positions in non-excluded CDS that
previously had been cleared pursuant to the exemptions would remain
unchanged, but no new positions could be established pursuant to the
exemptions until all of the underlying representations were again
accurate.
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C. Extended and Modified Temporary Conditional Exemption From Clearing
Agency Registration Requirement

    In the March 2010 ICE Trust Exemptive Order, the Commission granted
a temporary conditional exemption from clearing agency registration
under Section 17A of the Exchange Act to permit ICE Trust to act as a
CCP for Cleared CDS \18\ by novating trades of non-excluded CDS that
are securities and generating money and settlement obligations for
participants without having to register with the Commission as a
clearing agency.
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    \18\ For purposes of this Order, ``Cleared CDS'' means a credit
default swap that is submitted (or offered, purchased, or sold on
terms providing for submission) to ICE Trust, that is offered only
to, purchased only by, and sold only to eligible contract
participants (as defined in Section 1a(12) of the CEA as in effect
on the date of this Order (other than a person that is an eligible
contract participant under paragraph (C) of that section)), and in
which: (i) The reference entity, the issuer of the reference
security, or the reference security is one of the following: (A) An
entity reporting under the Exchange Act, providing Securities Act
Rule 144A(d)(4) information, or about which financial information is
otherwise publicly available; (B) a foreign private issuer whose
securities are listed outside the United States and that has its
principal trading market outside the United States; (C) a foreign
sovereign debt security; (D) an asset-backed security, as defined in
Regulation AB, issued in a registered transaction with publicly
available distribution reports; or (E) an asset-backed security
issued or guaranteed by the Federal National Mortgage Association
(``Fannie Mae''), the Federal Home Loan Mortgage Corporation
(``Freddie Mac'') or the Government National Mortgage Association
(``Ginnie Mae''); or (ii) the reference index is an index in which
80 percent or more of the index's weighting is comprised of the
entities or securities described in subparagraph (i). See definition
in paragraph III.(g)(1) of this Order. As discussed above, the
Commission's action today does not affect CDS that are swap
agreements under Section 206A of the Gramm-Leach-Bliley Act.
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    In the March 2010 ICE Trust Exemptive Order, the Commission
recognized the need to ensure the prompt establishment of ICE Trust as
a CCP for CDS transactions. The Commission also recognized the need to
ensure that important elements of Section 17A of the Exchange Act,
which sets forth the framework for the regulation and operation of the
U.S. clearance and settlement system for securities, apply to the non-
excluded CDS market. Accordingly, the temporary exemptions in the March
2010 ICE Trust Exemptive Order were subject to a number of conditions
designed to enable Commission staff to monitor ICE Trust's clearance
and settlement of CDS transactions.\19\ Moreover, the temporary
exemptions in the March 2010 ICE Trust Exemptive Order in part were
based on ICE Trust's representation that it met the standards set forth
in the Committee on Payment and Settlement Systems (``CPSS'') and IOSCO
report entitled: Recommendations for Central Counterparties
(``RCCP'').\20\ The RCCP establishes a framework that requires a CCP to
have: (i) The ability to facilitate the prompt and accurate clearance
and settlement of CDS transactions and to safeguard its users' assets;
and (ii) sound risk management, including the ability to appropriately
determine and collect clearing fund and monitor its users' trading.
This framework is generally consistent with the requirements of Section
17A of the Exchange Act.
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    \19\ See Securities Exchange Act Release No. 59527 (Mar. 6,
2009), 74 FR 10791 (Mar. 12, 2009).
    \20\ The RCCP was drafted by a joint task force (``Task Force'')
composed of representative members of IOSCO and CPSS and published
in November 2004. The Task Force consisted of securities regulators
and central bankers from 19 countries and the European Union. The
U.S. representatives on the Task Force included staff from the
Commission, the Federal Reserve Board, and the CFTC.
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    The Commission believes that continuing to facilitate the central
clearing of CDS transactions--including customer CDS transactions--
through a temporary conditional exemption from Section 17A will
continue to provide important risk management and systemic benefits by
avoiding an interruption in those CCP clearance and settlement services
pending the effective date of Title VII of the Dodd-Frank Act and the
related Deemed Registered Provision. Any interruption in CCP clearance
and settlement services for CDS transactions would eliminate the
benefits ICE Trust provides to the non-excluded CDS market.
    Our action today balances the aim of facilitating ICE Trust's
continued service as a CCP for non-excluded CDS transactions with
ensuring that important elements of Commission oversight are applied to
the non-excluded CDS market. The temporary exemptions will permit the
Commission to continue to develop direct experience with the non-
excluded CDS market. During the extended exemptive period, the
Commission will continue to monitor closely the impact of the CCPs on
the CDS market. In particular, the Commission will continue to monitor
the competitive effects of ICE Trust's rules and operations under this
exemptive relief with respect to fees charged to members, the
dissemination of market data, and the access to clearing services by
independent CDS exchanges or CDS trading platforms.\21\
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    \21\ ICE Trust has no rule requiring an executing dealer to be a
clearing member. As an operational matter, ICE Trust currently has
one authorized trade processing platform for submission of client
CDS transactions, ICE Link. Currently, ICE Link does not have a
mechanism by which a non-member dealer could submit a transaction
for clearing at ICE Trust. However, ICE Trust Clearing Rule 314
provides for open access to ICE Trust's clearing systems for all
reasonably qualified execution venues and trade processing
platforms. ICE Trust has represented that it remains committed to
work with reasonably qualified execution venues and trade processing
platforms to facilitate functionality for submission of trades by
non-member dealers if there is interest in such functionality. See
Letter from Kevin McClear, ICE Trust, to Elizabeth Murphy,
Secretary, Commission, Mar. 5, 2010.
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    This temporary extension of the March 2010 ICE Trust Exemptive
Order

also is designed to assure that--as represented in ICE Trust's
request--information will continue to be available to market
participants about the terms of the CDS cleared by ICE Trust, the
creditworthiness of ICE Trust or any guarantor, and the clearance and
settlement process for CDS.\22\ The Commission believes continued
operation of ICE Trust consistent with the conditions of this Order
will facilitate the availability to market participants of information
that should enable them to make better informed investment decisions
and better value and evaluate their Cleared CDS and counterparty
exposures relative to a market for CDS that is not centrally cleared.
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    \22\ The Commission believes that it is important in the CDS
market, as in the market for securities generally, that parties to
transactions should have access to financial information that would
allow them to evaluate appropriately the risks relating to a
particular investment and make more informed investment decisions.
See generally Policy Statement on Financial Market Developments, The
President's Working Group on Financial Markets, March 13, 2008,
available at: http://www.treas.gov/press/releases/reports/pwgpolicystatemktturmoil_03122008.pdf.
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    Accordingly, and consistent with our findings in the ICE Trust
Exemptive Orders and for the reasons described herein, the Commission
finds pursuant to Section 36 of the Exchange Act \23\ that it is
necessary and appropriate in the public interest and is consistent with
the protection of investors for the Commission to extend, as modified
herein, until July 16, 2011, the relief provided from the clearing
agency registration requirements of Section 17A by the March 2010 ICE
Trust Exemptive Order.
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    \23\ See supra note 16.
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    This temporary extension of the March 2010 ICE Trust Order is
subject to a number of conditions that are designed to enable
Commission staff to continue to monitor ICE Trust's clearance and
settlement of CDS transactions and help reduce risk in the CDS market.
These conditions require that ICE Trust: (i) Make available on its Web
site its annual audited financial statements; (ii) preserve records
related to the conduct of its Cleared CDS clearance and settlement
services for at least five years (in an easily accessible place for the
first two years); (iii) provide information relating to its Cleared CDS
clearance and settlement services to the Commission and provide access
to the Commission to conduct on-site inspections of facilities,
records, and personnel related to its Cleared CDS clearance and
settlement services; (iv) notify the Commission about material
disciplinary actions taken against any of its members utilizing its
Cleared CDS clearance and settlement services, and about the
involuntary termination of the membership of an entity that is
utilizing ICE Trust's Cleared CDS clearance and settlement services;
(v) provide the Commission with changes to rules, procedures, and any
other material events affecting its Cleared CDS clearance and
settlement services; (vi) provide the Commission with reports prepared
by independent audit personnel that are generated in accordance with
risk assessment of the areas set forth in the Commission's Automation
Review Policy Statements \24\ and its annual audited financial
statements prepared by independent audit personnel; and (vii) report
all significant systems outages to the Commission.
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    \24\ See Automated Systems of Self-Regulatory Organization,
Exchange Act Release No. 27445 (November 16, 1989), File No. S7-29-
89, and Automated Systems of Self-Regulatory Organization (II),
Exchange Act Release No. 29185 (May 9, 1991), File No. S7-12-19.
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    This temporary extension of the March 2010 ICE Trust Exemptive
Order is also conditioned on ICE Trust, directly or indirectly, making
available to the public on terms that are fair and reasonable and not
unreasonably discriminatory: (i) All end-of-day settlement prices and
any other prices with respect to Cleared CDS that ICE Trust may
establish to calculate mark-to-market margin requirements for ICE Trust
clearing members; and (ii) any other pricing or valuation information
with respect to Cleared CDS as is published or distributed by ICE
Trust.\25\
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    \25\ As a CCP, ICE Trust collects and processes information
about CDS transactions, prices, and positions. Public availability
of such information can improve fairness, efficiency, and
competitiveness in the market. Moreover, with pricing and valuation
information relating to Cleared CDS, market participants would be
able to derive information about underlying securities and indices,
potentially improving the efficiency and effectiveness of the
securities markets.
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    This temporary extension of the March 2010 ICE Trust Exemptive
Order is modified by adding one condition. If any ICE Trust clearing
member that receives or holds funds or securities for the purpose of
purchasing, selling, clearing, settling, or holding Cleared CDS for
other persons is a broker or dealer registered under Section 15(b) of
the Exchange Act (other than paragraph (11) thereof), and is permitted
under the Financial Industry Regulatory Authority (``FINRA'') rules to
use the applicable margin pursuant to ICE Trust rules as a minimum for
computing customer or broker-dealer margin, ICE Trust shall not
materially change its methodology for determining Cleared CDS margin
levels without prior written approval from the Commission staff, and
from FINRA with respect to customer margin requirements that would
apply to broker-dealers.

D. Extended Temporary Conditional Exemption From Exchange Registration
Requirements

    In the March 2010 ICE Trust Exemptive Order, the Commission granted
a temporary conditional exemption to ICE Trust from the requirements of
Sections 5 and 6 of the Exchange Act, and the rules and regulations
thereunder, in connection with ICE Trust's calculation of mark-to-
market prices for open positions in Cleared CDS. The Commission also
temporarily exempted ICE Trust participants from the prohibitions of
Section 5 to the extent that they use ICE Trust to effect or report any
transaction in Cleared CDS in connection with ICE Trust's calculation
of mark-to-market prices for open positions in Cleared CDS. Section 5
of the Exchange Act contains certain restrictions relating to the
registration of national securities exchanges,\26\ while Section 6
provides the procedures for registering as a national securities
exchange.\27\
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    \26\ In particular, Section 5 states:
    It shall be unlawful for any broker, dealer, or exchange,
directly or indirectly, to make use of the mails or any means or
instrumentality of interstate commerce for the purpose of using any
facility of an exchange * * * to effect any transaction in a
security, or to report any such transactions, unless such exchange
(1) is registered as a national securities exchange under section 6
of [the Exchange Act], or (2) is exempted from such registration * *
* by reason of the limited volume of transactions effected on such
exchange * * *. 15 U.S.C. 78e.
    \27\ 15 U.S.C. 78f. Section 6 of the Exchange Act also sets
forth various requirements to which a national securities exchange
is subject.
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    The Commission granted these temporary exemptions to facilitate the
establishment of ICE Trust's end-of-day settlement price process. ICE
Trust had represented that in connection with its clearing and risk
management process it would calculate an end-of-day settlement price
for each Cleared CDS in which an ICE Trust participant has a cleared
position, based on prices submitted by the participants. As part of
this mark-to-market process, ICE Trust has periodically required its
clearing members to execute certain CDS trades at the price at which
certain quotations of the clearing members cross. ICE Trust represents
that it wishes to continue periodically requiring clearing members to
execute certain CDS trades in this manner.
    As discussed above, the Commission has found in general that it is
necessary or appropriate in the public interest, and is consistent with
the protection of

investors, to facilitate continued CDS clearing by ICE Trust.
Consistent with that finding--and in reliance on ICE Trust's
representation that the end-of-day settlement pricing process,
including the periodically required trading, is integral to its risk
management--the Commission further finds that it is necessary or
appropriate in the public interest, and is consistent with the
protection of investors that the Commission exercise its authority
under Section 36 of the Exchange Act to extend, until July 16, 2011,
ICE Trust's temporary exemption from Sections 5 and 6 of the Exchange
Act in connection with its calculation of mark-to-market prices for
open positions in Cleared CDS, and ICE Trust clearing members'
temporary exemption from Section 5 with respect to such trading
activity.
    The temporary exemption for ICE Trust will continue to be subject
to three conditions. First, ICE Trust must report the following
information with respect to its calculation of mark-to-market prices
for Cleared CDS to the Commission within 30 days of the end of each
quarter, and preserve such reports during the life of the enterprise
and of any successor enterprise:
     The total dollar volume of transactions executed during
the quarter, broken down by reference entity, security, or index; and
     The total unit volume and/or notional amount executed
during the quarter, broken down by reference entity, security, or
index.
    Second, ICE Trust must establish and maintain adequate safeguards
and procedures to protect participants' confidential trading
information. Such safeguards and procedures shall include: (a) Limiting
access to the confidential trading information of participants to those
employees of ICE Trust who are operating the system or responsible for
its compliance with this exemption or any other applicable rules; and
(b) establishing and maintaining standards restricting the trading by
employees of ICE Trust for their own accounts. ICE Trust must establish
and maintain adequate oversight procedures to ensure that the
safeguards and procedures established pursuant to this condition are
followed.
    Third, ICE Trust must comply with the conditions to the temporary
exemption from Section 17A of the Exchange Act in this Order, given
that this exemption is granted in the context of our goal of continuing
to facilitate ICE Trust's ability to act as a CCP for non-excluded CDS,
and given ICE Trust's representation that the end-of-day settlement
pricing process, including the periodically required trading, is
integral to its risk management.

E. Extended Temporary Conditional General Exemption for ICE Trust,
Certain ICE Trust Clearing Members, and Certain Eligible Contract
Participants

    As the Commission recognized when it initially provided temporary
exemptions in connection with CDS clearing by ICE Trust, applying the
full panoply of Exchange Act requirements to participants in
transactions in non-excluded CDS likely would deter some participants
from using CCPs to clear CDS transactions. The Commission also
recognized that it is important that the antifraud provisions of the
Exchange Act apply to transactions in non-excluded CDS, particularly
given that OTC transactions subject to individual negotiation that
qualify as security-based swap agreements already are subject to those
provisions.\28\
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    \28\ While Section 3A of the Exchange Act excludes ``swap
agreements'' from the definition of ``security,'' certain antifraud
and insider trading provisions under the Exchange Act explicitly
apply to security-based swap agreements. See (a) paragraphs (2)
through (5) of Section 9(a), 15 U.S.C. 78i(a), prohibiting the
manipulation of security prices; (b) Section 10(b), 15 U.S.C.
78j(b), and underlying rules prohibiting fraud, manipulation or
insider trading (but not prophylactic reporting or recordkeeping
requirements); (c) Section 15(c)(1), 15 U.S.C. 78o(c)(1), which
prohibits brokers and dealers from using manipulative or deceptive
devices; (d) Sections 16(a) and (b), 15 U.S.C. 78p(a) and (b), which
address disclosure by directors, officers and principal
stockholders, and short-swing trading by those persons, and rules
with respect to reporting requirements under Section 16(a); (e)
Section 20(d), 15 U.S.C. 78t(d), providing for antifraud liability
in connection with certain derivative transactions; and (f) Section
21A(a)(1), 15 U.S.C. 78u-1(a)(1), related to the Commission's
authority to impose civil penalties for insider trading violations.
     ``Security-based swap agreement'' is defined in Section 206B of
the Gramm-Leach Bliley Act as a swap agreement in which a material
term is based on the price, yield, value, or volatility of any
security or any group or index of securities, or any interest
therein.
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    As a result, the Commission concluded that it is appropriate in the
public interest and consistent with the protection of investors to
apply temporarily substantially the same framework to transactions by
market participants in non-excluded CDS that applies to transactions in
security-based swap agreements. Consistent with that conclusion, the
Commission temporarily exempted ICE Trust, and certain members and
eligible contract participants, from a number of Exchange Act
requirements, subject to certain conditions, while excluding certain
enforcement-related and other provisions from the scope of the
exemption.
    The Commission believes that continuing to facilitate the central
clearing of CDS transactions by ICE Trust through this type of
temporary exemption will provide important risk management benefits and
systemic benefits. The Commission also believes that facilitating the
central clearing of customer CDS transactions, subject to the
conditions in this Order, will provide an opportunity for the customers
of ICE Trust clearing members to control counterparty risk.
    Accordingly, pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to extend the relief provided by the March 2010 ICE Trust
Exemptive Order, until July 16, 2011, related to ICE Trust's, and
certain members' and eligibility contract participants' exemption from
certain requirements under the Exchange Act, as modified herein.
    This temporary conditional exemption applies to ICE Trust and to
any eligible contract participants \29\--including any ICE Trust
clearing member--other than eligible contract participants that are
self-regulatory organizations, registered brokers or dealers, or
futures commission merchants registered pursuant to Section 4f(a)(1) of
the CEA that receive or hold funds or securities for the purpose of
purchasing, selling, clearing, settling, or holding Cleared CDS for
other persons.\30\
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    \29\ This exemption in general applies to eligible contract
participants, as defined in Section 1a(12) of the CEA as in effect
on the date of this Order, other than persons that are eligible
contract participants under paragraph (C) of that section.
    \30\ A separate temporary exemption addresses the Cleared CDS
activities of registered broker-dealers (including broker-dealers
that are also registered as futures commission merchants pursuant to
Section 4f(a)(1) of the CEA). See Part II.H, infra. Solely for
purposes of this Order, a registered broker-dealer, or a broker or
dealer registered under Section 15(b) of the Exchange Act, does not
refer to someone that would otherwise be required to register as a
broker or dealer solely as a result of activities in Cleared CDS in
compliance with this Order. In addition, a separate temporary
exemption addresses the Cleared CDS activities of a futures
commission merchant registered pursuant to Section 4f(a)(1) of the
CEA (but that is not registered as a broker-dealer under Section
15(b) of the Exchange Act (other than paragraph 11 thereof)) that
receives or holds funds or securities for the purpose of purchasing,
selling, clearing, settling, or holding Cleared CDS for other
persons. See Part II.G, infra.
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    As before, under this temporary conditional exemption, and solely
with respect to Cleared CDS, those persons generally are exempt from
the provisions of the Exchange Act and the rules and regulations
thereunder that do not apply to security-based swap agreements. Thus,
those persons would still be subject to those Exchange Act

requirements that explicitly are applicable in connection with
security-based swap agreements.\31\ In addition, all provisions of the
Exchange Act related to the Commission's enforcement authority in
connection with violations or potential violations of such provisions
would remain applicable.\32\ In this way, the temporary conditional
exemption would apply the same Exchange Act requirements in connection
with non-excluded CDS as apply in connection with OTC credit default
swaps.
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    \31\ See note 28, supra.
    \32\ Thus, for example, the Commission retains the ability to
investigate potential violations and bring enforcement actions in
the Federal courts as well as in administrative proceedings, and to
seek the full panoply of remedies available in such cases.
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    Consistent with the March 2010 ICE Trust Exemption Order, this
temporary conditional exemption does not extend to: the exchange
registration requirements of Exchange Act Sections 5 and 6; \33\ the
clearing agency registration requirements of Exchange Act Section 17A;
the requirements of Exchange Act Sections 12, 13, 14, 15(d), and 16;
\34\ the broker-dealer registration requirements of Section 15(a)(1)
\35\ and the other requirements of the Exchange Act, including
paragraphs (4) and (6) of Section 15(b),\36\ and the rules and
regulations thereunder that apply to a broker or dealer that is not
registered with the Commission; or certain provisions related to
government securities.\37\
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    \33\ This Order includes a separate temporary exemption from
Sections 5 and 6 in connection with the mark-to-market process of
ICE Trust, discussed above, at Section II.D.
    \34\ 15 U.S.C. 78l, 78m, 78n, 78o(d), 78p. Eligible contract
participants and other persons instead should refer to the interim
final temporary rules issued by the Commission.
    \35\ 15 U.S.C. 78o(a)(1).
    \36\ Exchange Act Sections 15(b)(4) and 15(b)(6), 15 U.S.C.
78o(b)(4) and (b)(6), grant the Commission authority to take action
against broker-dealers and associated persons in certain situations.
    \37\ This exemption specifically does not extend to the Exchange
Act provisions applicable to government securities, as set forth in
Section 15C, 15 U.S.C. 78o-5, and its underlying rules and
regulations. The exemption also does not extend to related
definitions found at paragraphs (42) through (45) of Section 3(a),
15 U.S.C. 78c(a). The Commission does not have authority under
Section 36 to issue exemptions in connection with those provisions.
See Exchange Act Section 36(b), 15 U.S.C. 78mm(b).
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    As before, any ICE Trust clearing member relying on this temporary
conditional exemption from Exchange Act requirements must be in
material compliance with ICE Trust rules to be eligible for this
exemption. In addition, any ICE Trust clearing member relying on this
exemption that participates in the clearing of Cleared CDS transactions
on behalf of other persons annually must provide a certification to ICE
Trust that attests to whether the clearing member is relying on the
temporary conditional exemption from broker-dealer related requirements
described below.\38\
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    \38\ This condition requiring clearing members to convey
information to ICE Trust as a repository for regulators, and other
conditions of this Order that require clearing members or others to
convey information (e.g., an audit report related to the clearing
member's compliance with exemptive conditions) to ICE Trust, does
not impose upon ICE Trust any independent duty to audit or otherwise
review that information. These conditions also do not impose on ICE
Trust any independent fiduciary or other obligation to any customer
of a clearing member.
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F. Extended Conditional Temporary Exemption from Broker-Dealer Related
Requirements for Certain Clearing Members of ICE Trust and Others

    In the March 2010 ICE Trust Exemptive Order, the Commission granted
a conditional temporary exemption from particular Exchange Act
requirements to certain clearing members of ICE Trust, and to certain
eligible contract participants, in connection with CDS cleared on ICE
Trust. Absent an exception or exemption, persons that effect
transactions in non-excluded CDS that are securities may be required to
register as broker-dealers pursuant to Section 15(a)(1) of the Exchange
Act.\39\ Certain reporting and other requirements of the Exchange Act
could apply to such persons, as broker-dealers, regardless of whether
they are registered with the Commission.
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    \39\ 15 U.S.C. 78o(a)(1). This section generally provides that,
absent an exception or exemption, a broker or dealer that uses the
mails or any means of interstate commerce to effect transactions in,
or to induce or attempt to induce the purchase or sale of, any
security must register with the Commission.
    Section 3(a)(4) of the Exchange Act generally defines a
``broker'' as ``any person engaged in the business of effecting
transactions in securities for the account of others,'' but excludes
certain bank securities activities. 15 U.S.C. 78c(a)(4). Section
3(a)(5) of the Exchange Act generally defines a ``dealer'' as ``any
person engaged in the business of buying and selling securities for
his own account,'' but includes exceptions for certain bank
activities. 15 U.S.C. 78c(a)(5). Exchange Act Section 3(a)(6)
defines a ``bank'' as a bank or savings association that is directly
supervised and examined by State or Federal banking authorities
(with certain additional requirements for banks and savings
associations that are not chartered by a Federal authority or a
member of the Federal Reserve System). 15 U.S.C. 78c(a)(6).
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    In granting that exemption, the Commission noted that it is
consistent with our investor protection mandate to require securities
intermediaries that receive or hold funds and securities on behalf of
others to comply with standards that safeguard the interests of their
customers.\40\ The Commission recognized, however, that requiring
intermediaries that receive or hold funds and securities on behalf of
customers in connection with transactions in non-excluded CDS to
register as broker-dealers may deter the use of CCPs in customer CDS
transactions, to the detriment of the markets and market participants
generally. The Commission concluded that those factors, along with
certain representations of ICE Trust,\41\ argued in favor of
flexibility in applying the requirements of the Exchange Act to these
intermediaries, conditioned on requiring the intermediaries to take
reasonable steps to help increase the likelihood that their customers
would be protected in the event the intermediary became insolvent, even
if those safeguards are not as strong as those required of registered
broker-dealers.
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    \40\ Registered broker-dealers are required to segregate assets
held on behalf of customers from proprietary assets, because
segregation will assist customers in recovering assets in the event
the intermediary fails. Absent such segregation, collateral could be
used by an intermediary to fund its own business, and could be
attached to satisfy the intermediary's debts were it to fail.
Moreover, the maintenance of adequate capital and liquidity protects
customers, CCPs, and other market participants. Adequate books and
records (including both transactional and position records) are
necessary to facilitate day to day operations as well as to help
resolve situations in which an intermediary fails and either a
regulatory authority or receiver is forced to liquidate the firm.
Appropriate records also are necessary to allow examiners to review
for improper activities, such as insider trading or fraud.
    \41\ We noted that in granting the temporary exemption, we also
relied on ICE Trust's representation that before offering the Non-
Member Framework, it will adopt a requirement that non-U.S. clearing
members subject to the framework are regulated by: (i) A signatory
to the IOSCO Multilateral Memorandum of Understanding Concerning
Consultation and Cooperation and the Exchange of Information, or
(ii) a signatory to a bilateral arrangement with the Commission for
enforcement cooperation. We further noted that non-U.S. clearing
members that do not meet these criteria would not be eligible to
rely on this exemption.
---------------------------------------------------------------------------

    As a result, and solely with respect to Cleared CDS, the Commission
provided a temporary conditional exemption from the broker-dealer
registration requirements of Section 15(a)(1), and the other
requirements of the Exchange Act (other than paragraphs (4) and (6) of
Section 15(b) \42\) and the rules and

regulations thereunder that apply to a broker or dealer that is not
registered with the Commission, to: (i) ICE Trust clearing members
other than registered broker-dealers; and (ii) any eligible contract
participant, other than a registered broker-dealer, that does not
receive or hold funds or securities for the purpose of purchasing,
selling, clearing, settling, or holding Cleared CDS positions for other
persons.\43\
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    \42\ As noted above, see note 36, supra, Exchange Act Sections
15(b)(4) and 15(b)(6) grant the Commission authority to take action
against broker-dealers and associated persons in certain situations.
Accordingly, while the exemption we granted from broker-dealer
requirements generally extended to persons that act as broker-
dealers in the market for Cleared CDS (potentially including inter-
dealer brokers that do not hold funds or securities for others),
such persons may be subject to actions under Sections 15(b)(4) and
(b)(6) of the Exchange Act.
    In addition, such persons may be subject to actions under
Exchange Act Section 15(c)(1), 15 U.S.C. 78o(c)(1), which prohibits
brokers and dealers from using manipulative or deceptive devices. As
noted above, Section 15(c)(1) explicitly applies to security-based
swap agreements. Sections 15(b)(4), 15(b)(6) and 15(c)(1), of
course, would not apply to persons subject to this exemption who do
not act as broker-dealers or associated persons of broker-dealers.
    \43\ In some circumstances, an eligible contract participant
that does not hold customer funds or securities nonetheless may act
as a dealer in securities transactions, or as a broker (such as an
inter-dealer broker).
---------------------------------------------------------------------------

    That exemption was subject to a number of conditions. For ICE Trust
clearing members that receive or hold funds or securities of U.S.
persons (or who receive or hold funds or securities of any person in
the case of a U.S. clearing member)--other than for an affiliate that
controls, is controlled by, or is under common control with the
clearing member--in connection with Cleared CDS, these included a
condition requiring the clearing member, as promptly as practicable
after receipt, to transfer such funds and securities (other than those
promptly returned to such other persons) to either the Custodial Client
Omnibus Margin Account at ICE Trust or to an account held by a third-
party custodian. Additional related conditions addressed the types of
permissible arrangements for holding collateral at a third-party
custodian, and permissible custodians.\44\ These conditions requiring
customer collateral to be segregated from clearing members address only
the initial margin that customers post in connection with Cleared CDS.
---------------------------------------------------------------------------

    \44\ Other conditions of this exemption precluded the clearing
of CDS transaction for natural persons, required certain risk
disclosures to customers, required the clearing member also must
annually provide ICE Trust with a self-assessment that it is in
compliance with the requirements along with a report by the clearing
member's independent third-party auditor that attests to that
assessment, and required the clearing member to agree to provide the
Commission with access to information related to Cleared CDS
transactions.
---------------------------------------------------------------------------

    As before, the Commission is required to balance the goals of
promoting the central clearing of customer CDS transactions against the
goal of protecting customers, and to be mindful that these conditions
cannot provide legal certainty that customer collateral in fact would
be protected in the event an ICE Trust clearing member were to become
insolvent. The Commission believes that the segregation framework set
forth in the earlier orders represents a reasonable step to help
protect the collateral posted by customers of ICE Trust's clearing
members from the threat of loss in the event of clearing member
insolvency.
    Accordingly, pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to extend, as modified herein, until July 16, 2011,
relief provided from certain Exchange Act requirements related to
broker-dealers by the March 2010 ICE Trust Exemption Order.\45\
---------------------------------------------------------------------------

    \45\ As before, in granting this relief we are relying on
representations by ICE Trust that non-U.S. clearing members that
provide their customers with access to CDS clearing on ICE Trust are
regulated by: (i) a signatory to the IOSCO Multilateral Memorandum
of Understanding Concerning Consultation and Cooperation and the
Exchange of Information, or (ii) a signatory to a bilateral
arrangement with the Commission for enforcement cooperation. Non-
U.S. clearing members that do not meet these criteria would not be
eligible to rely on this exemption.
---------------------------------------------------------------------------

    This exemption is available to ICE Trust clearing members other
than registered broker-dealers or futures commission merchants
registered pursuant to Section 4f(a)(1) of the CEA that receive or hold
funds or securities for the purpose of purchasing, selling, clearing,
settling, or holding Cleared CDS for other persons.\46\ As before, this
relief is also available to any eligible contract participant, other
than a registered broker-dealer, that does not receive or hold funds or
securities for the purpose of purchasing, selling, clearing, settling,
or holding Cleared CDS positions for other persons.\47\ As before, and
solely with respect to Cleared CDS, those persons temporarily will be
exempt from the broker-dealer registration requirements of Section
15(a)(1), and the other requirements of the Exchange Act (other than
paragraphs (4) and (6) of Section 15(b)) and the rules and regulation
thereunder that apply to a broker or dealer that is not registered with
the Commission.
---------------------------------------------------------------------------

    \46\ Only registered broker-dealers were excluded in the March
2010 ICE Trust Exemptive Order.
    \47\ In some circumstances, an eligible contract participant
that does not hold customer funds or securities nonetheless may act
as a dealer in securities transactions, or as a broker (such as an
inter-dealer broker).
    Solely for purposes of this requirement, an eligible contract
participant would not be viewed as receiving or holding funds or
securities for purpose of purchasing, selling, clearing, settling,
or holding Cleared CDS positions for other persons, if the other
persons involved in the transaction would not be considered
``customers'' of the eligible contract participant under the
analysis used for determining whether certain persons would be
considered ``customers'' of a broker-dealer under Exchange Act Rule
15c3-3(a)(1). For these purposes, and for the purpose of the
definition of ``Cleared CDS,'' the terms ``purchasing'' and
``selling'' mean the execution, termination (prior to its scheduled
maturity date), assignment, exchange, or similar transfer or
conveyance of, or extinguishing the rights or obligations under, a
Cleared CDS, as the context may require. This is consistent with the
meaning of the terms ``purchase'' or ``sale'' under the Exchange Act
in the context of security-based swap agreements. See Exchange Act
Section 3A(b)(4).
---------------------------------------------------------------------------

    As before, for all ICE Trust clearing members--regardless of
whether they receive or hold customer collateral in connection with
Cleared CDS--this temporary exemption is conditioned on the clearing
member being in material compliance with ICE Trust's rules, as well as
on the clearing member being in compliance with applicable laws and
regulations relating to capital, liquidity, and segregation of
customers' funds and securities (and related books and records
provisions) with respect to Cleared CDS.
    Additional conditions apply to ICE Trust clearing members that
receive or hold funds or securities of U.S. persons (or that receive or
hold funds or securities of any person in the case of a U.S. clearing
member)--other than for an affiliate that controls, is controlled by,
or is under common control with the clearing member--in connection with
Cleared CDS. For those ICE Trust clearing members, this temporary
exemption is conditioned on the customer not being a natural person,
and on the clearing member providing certain risk disclosures to the
customer.\48\
---------------------------------------------------------------------------

    \48\ The clearing member must disclose that it is not regulated
by the Commission and that U.S. broker-dealer segregation
requirements and protections under the Securities Investor
Protection Act will not apply, that the insolvency law of the
applicable jurisdiction may affect the customer's ability to recover
funds and securities or the speed of any such recovery, and (if
applicable) that non-U.S. members may be subject to an insolvency
regime that is materially different from that applicable to U.S.
persons.
---------------------------------------------------------------------------

    In addition, such clearing members must, as promptly as practical
after receipt, transfer such funds and securities--other than those
promptly returned to such other person--to either the Custodial Client
Omnibus Margin Account at ICE Trust \49\ or an account held by a third-
party custodian, as described below.
---------------------------------------------------------------------------

    \49\ Cash collateral transferred to ICE Trust may be invested in
``Eligible Custodial Assets,'' as defined in ICE Trust's ``Custodial
Asset Policies.'' Also, collateral transferred to ICE Trust may be
held at a subcustodian.
---------------------------------------------------------------------------

    As before, collateral that is held at a third-party custodian must
either be held: (1) In the name of the customer, subject to an
agreement in which the customer, the clearing member and the custodian
are parties, acknowledging

that the assets held therein are customer assets used to collateralize
obligations of the customer to the clearing member, and that the assets
held in the account may not otherwise be pledged or rehypothecated by
the clearing member or the custodian; or (2) in an omnibus account for
which the clearing member maintains daily records as to the amount
owing to each customer, and which is subject to an agreement between
the clearing member and the custodian specifying: (i) That all account
assets are held for the exclusive benefit of the clearing member's
customers and are being kept separate from any other accounts that the
clearing member maintains with the custodian; (ii) that the account
assets may not be used as security for a loan to the clearing member by
the custodian, and shall be subject to no right, charge, security
interest, lien, or claim of any kind in favor of the custodian or any
person claiming through the custodian; and (iii) that the assets may
not otherwise be pledged or rehypothecated by the clearing member or
the custodian.\50\ Under either approach, the third-party custodian
cannot be affiliated with the clearing member.\51\ Moreover, if the
third-party custodian is a U.S. entity, it must be a bank (as that term
is defined in Section 3(a)(6) of the Exchange Act), have total
regulatory capital of at least $1 billion,\52\ and have been approved
to engage in a trust business by an appropriate regulatory agency. A
custodian that is not a U.S. entity must have regulatory capital of at
least $1 billion,\53\ and must provide the clearing member, the
customer and ICE Trust with a legal opinion providing that the account
assets are subject to regulatory requirements in the custodian's home
jurisdiction designed to protect, and provide for the prompt return of,
custodial assets in the event of the custodian's insolvency, and that
the assets held in that account reasonably could be expected to be
legally separate from the clearing member's assets in the event of the
clearing member's insolvency. Also, cash collateral posted with the
third-party custodian may be invested in other assets, consistent with
the investment policies that govern collateral held at ICE Trust.\54\
Finally, a clearing member that uses a third-party custodian to hold
customer collateral must notify ICE Trust of that use.
---------------------------------------------------------------------------

    \50\ We do not contemplate that either of these approaches
involving the use of a third-party custodian would interfere with
the ability of a clearing member and its customer to agree as to how
any return or losses earned on those assets would be distributed
between the clearing member and its customer.
    Also, the restriction in both approaches on the clearing
member's and the custodian's ability to rehypothecate these customer
funds and securities does not preclude that collateral from being
transferred to ICE Trust as necessary to satisfy variation margin
requirements in connection with the customer's CDS position.
    \51\ For purposes of the Order, an ``affiliated person'' of a
clearing member mean any person who directly or indirectly controls
a clearing member or any person who is directly or indirectly
controlled by or under common control with a clearing member;
ownership of 10 percent or more of an entity's common stock will be
deemed prima facie control of that entity. See definition in
paragraph III.(g)(2) of this Order. This standard is analogous to
the standard used to identify affiliated persons of broker-dealers
under Exchange Act Rule 15c3-3(a)(13), 17 CFR 240.15c3-3(a)(13).
    \52\ In particular, custodians that are U.S. entities must have
total capital, as calculated to meet the applicable requirements
imposed by the entity's appropriate regulatory agency of at least $1
billion. The term ``appropriate regulatory agency'' is defined in
Section 3(a)(34) of the Exchange Act, 15 U.S.C. 78c(a)(34).
    \53\ Custodians that are non-U.S. entities must have total
capital, as calculated to meet the applicable requirements imposed
by the foreign financial regulatory authority of at least $1
billion. The term ``foreign financial regulatory authority'' is
defined in Section 3(a)(52) of the Exchange Act, 15 U.S.C.
78c(a)(52).
    \54\ See note 49, supra.
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    As before, to the extent there is any delay in the clearing member
transferring such funds and securities to ICE Trust or a third-party
custodian,\55\ the clearing member must effectively segregate the
collateral in a way that, pursuant to applicable law, could reasonably
be expected to effectively protect the collateral from the clearing
member's creditors. The clearing member may not permit customers to
``opt out'' of such segregation even if applicable regulations or laws
otherwise would permit such ``opt out.''
---------------------------------------------------------------------------

    \55\ This provision is intended to address short-term technology
or operational issues. ICE Trust rules require collateral to be
transferred promptly on receipt, with the expectation that margin
would be transferred on the same business day.
---------------------------------------------------------------------------

    Also, as before, this temporary exemption is conditioned on
clearing member compliance with a self-assessment and audit
requirement,\56\ and on the clearing member's agreement to provide the
Commission with access to information related to Cleared CDS
transactions.\57\
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    \56\ In particular, to facilitate compliance with the
segregation practices that are required as a condition to this
temporary exemption, the clearing member must annually provide ICE
Trust with a self-assessment that it is in compliance with the
requirements, along with a report by the clearing member's
independent third-party auditor that attests to that assessment. The
report must be dated the same date as the clearing member's annual
audit report (but may be separate from it), and must be produced in
accordance with the standards that the auditor follows in auditing
the clearing member's financial statements.
    As the self-assessment is intended to serve as the basis for the
third-party auditor's report, we expect the self-assessment to be
generally contemporaneous with that report.
    \57\ Specifically, to support these segregation practices and
enhance the ability to detect and deter circumstances in which
clearing members fail to segregate customer collateral consistent
with the exemption, this temporary exemption is conditioned on the
clearing member agreeing to provide the Commission with access to
information related to Cleared CDS transactions. This requirement is
consistent with a requirement in Exchange Act Rule 15a-
6(a)(3)(i)(B), which exempts certain foreign broker-dealers from
registering with the Commission. See Exchange Act Rule 15a-
6(a)(3)(i)(B).
    Under this condition, the clearing member would provide the
Commission (upon request and subject to agreements reached between
the Commission or the U.S. Government and an appropriate foreign
securities authority, see Section 3(a)(50) of the Exchange Act, 15
U.S.C. 78c(a)(50)), with information or documents within the
clearing member's possession, custody, or control, as well as
testimony of clearing member personnel and assistance in taking the
evidence of other persons, that relates to Cleared CDS transactions.
If, after the clearing member has exercised its best efforts to
provide this information (including requesting the appropriate
governmental body and, if legally necessary, its customers), the
clearing member nonetheless is prohibited from providing the
information by applicable foreign law or regulations, this temporary
conditional exemption would no longer be available to the clearing
member.
    Consistent with the discussion above as to the loss of an
exemption due to an underlying representation no longer being
accurate, see note 17, supra, if a clearing member were to lose the
benefit of this exemption due to the failure to provide information
to the Commission as the result of a prohibition by an applicable
foreign law or regulation, the legal status of existing open
positions in non-excluded CDS associated with those clearing members
and its customers would remain unchanged, but the clearing member
could not establish new CDS positions pursuant to the exemption.
---------------------------------------------------------------------------

    As the Commission discussed in the March 2010 ICE Trust Exemptive
Order, requiring clearing members that receive or hold customer
collateral to satisfy such conditions will not guarantee that a
customer would receive the return of its collateral in the event of a
clearing member's insolvency, particularly in light of the fact-
specific nature of the insolvency process and the multiplicity of
insolvency regimes that may apply to ICE Trust's members clearing for
U.S. customers. The Commission believes, however, that these steps will
increase the likelihood that customers would be able to access
collateral in such an insolvency event. The Commission also recognizes
that these customers generally may be expected to be sophisticated
market participants that should be able to weigh the risks associated
with entering into arrangements with intermediaries that are not
registered broker-dealers, particularly in light of the disclosure
required as a condition to this temporary exemption.

G. Conditional Temporary Exemption for Certain Clearing Members of ICE
Trust That Are Registered Futures Commission Merchants

    Absent an exception or exemption, futures commission merchants that
effect transactions in non-excluded CDS that are securities may be
required to register as broker-dealers pursuant to Section 15(a)(1) of
the Exchange Act.\58\ Moreover, certain reporting and other
requirements of the Exchange Act could apply to such persons, as
broker-dealers, regardless of whether they are registered with the
Commission.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78o(a)(1). This section generally provides that,
absent an exception or exemption, a broker or dealer that uses the
mails or any means of interstate commerce to effect transactions in,
or to induce or attempt to induce the purchase or sale of, any
security must register with the Commission.
---------------------------------------------------------------------------

    It is consistent with our investor protection mandate to require
that intermediaries in securities transactions that receive or hold
funds and securities on behalf of others comply with standards that
safeguard the interests of their customers. At the same time, requiring
intermediaries that receive or hold funds and securities on behalf of
customers in connection with transactions in non-excluded CDS, prior to
the effective date of the Dodd-Frank Act, to register as broker-dealers
may deter the use of CCPs in CDS transactions, to the detriment of the
markets and market participants generally.
    Accordingly, pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to grant a conditional exemption until July 16, 2011 from
certain Exchange Act requirements. In general, the Commission is
providing a temporary exemption, subject to the conditions discussed
below, to any ICE Trust clearing member registered as a futures
commission merchant pursuant to Section 4f(a)(1) of the CEA (but that
is not registered as a broker-dealer under Section 15(b) of the
Exchange Act (other than paragraph (11) thereof)) that receives or
holds funds or securities for the purpose of purchasing, selling,
clearing, settling or holding Cleared CDS positions for other persons.
Solely with respect to Cleared CDS, those members generally will be
exempt from those provisions of the Exchange Act and the underlying
rules and regulations that do not apply to security-based swap
agreements. This exemption does not extend to Exchange Act provisions
that explicitly apply in connection with security-based swap
agreements,\59\ or to related enforcement authority provisions.\60\
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    \59\ See note 28, supra.
    \60\ Thus, for example, the Commission retains the ability to
investigate potential violations and bring enforcement actions in
the Federal courts as well as in administrative proceedings, and to
seek the full panoply of remedies available in such cases.
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    This temporary exemption also does not extend to: The exchange
registration requirements of Exchange Act Sections 5 and 6; \61\ the
clearing agency registration requirements of Exchange Act Section 17A;
the requirements of Exchange Act Sections 12, 13, 14, 15(d), and 16;
\62\ the Commission's administrative proceeding authority under
Sections 15(b)(4) and (b)(6); \63\ or certain provisions related to
government securities.\64\
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    \61\ This Order also includes a separate temporary exemption
from Sections 5 and 6 in connection with the settlement price
calculation methodology of ICE Trust. See Part II.D, supra.
    \62\ 15 U.S.C. 78l, 78m, 78n, 78o(d), 78p. Futures commission
merchants instead should refer to the interim final temporary rules
issued by the Commission. See note 1, supra.
    \63\ Exchange Act Sections 15(b)(4) and 15(b)(6), 15 U.S.C.
78o(b)(4) and (b)(6), grant the Commission authority to take action
against broker-dealers and associated persons in certain situations.
    \64\ This exemption specifically does not extend to the Exchange
Act provisions applicable to government securities, as set forth in
Section 15C, 15 U.S.C. 78o-5, and its underlying rules and
regulations; nor does the exemption extend to related definitions
found at paragraphs (42) through (45) of Section 3(a), 15 U.S.C.
78c(a). The Commission does not have authority under Section 36 to
issue exemptions in connection with those provisions. See Exchange
Act Section 36(b), 15 U.S.C. 78mm(b).
---------------------------------------------------------------------------

    This temporary exemption is subject to the clearing member
complying with conditions that are important for protecting customer
funds and securities. Any ICE Trust clearing member relying on this
temporary exemption must be in material compliance with the rules of
ICE Trust, and in material compliance with applicable laws and
regulations relating to capital, liquidity, and segregation of
customers' funds and securities (and related books and records
provisions) with respect to Cleared CDS.\65\ In addition, the customers
for whom the clearing member receives or holds such funds or securities
may not be natural persons, and the clearing member must make certain
risk disclosures to those customers.\66\
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    \65\ The term ``customer,'' solely for purposes of Part III.(e)
and (f)2, infra, and corresponding references in this Order, means a
``customer'' as defined under CFTC Regulation 1.3(k). 17 CFR 1.3(k).
    \66\ The clearing member must disclose that it is not regulated
by the Commission, that U.S. broker-dealer segregation requirements
and protections under the Securities Investor Protection Act will
not apply to any funds or securities held by the clearing member to
collateralize Cleared CDS, and that the applicable insolvency law
may affect such customers' ability to recover funds and securities,
or the speed of any such recovery, in an insolvency proceeding.
---------------------------------------------------------------------------

    This temporary exemption is further conditioned on funds or
securities received or held by the clearing member for the purpose of
purchasing, selling, clearing, settling, or holding Cleared CDS
positions for those customer being held: (i) In an account established
pursuant to Section 4d of the CEA; or (ii) in the absence of a 4d Order
from the CFTC, in an account that is part of a separate account class,
specified by CFTC Bankruptcy Rules,\67\ established for a futures
commission merchant to hold its customers' positions and collateral in
cleared OTC derivatives.
---------------------------------------------------------------------------

    \67\ 17 CFR 190.01 et seq.
---------------------------------------------------------------------------

    To facilitate compliance with these segregation conditions, the
clearing member--regardless of the type of account discussed above that
it uses--also must annually provide ICE Trust with a self-assessment
that it is in compliance with the requirements, along with a report by
the clearing member's independent third-party auditor that attests to
that assessment.\68\ Finally, an ICE Trust clearing member that
receives or holds funds or securities of customers for the purpose of
purchasing, selling, clearing, settling, or holding Cleared CDS
positions shall segregate such funds and securities of customers from
the ICE Trust clearing member's own assets (i.e., the member may not
permit the customers to ``opt out'' of applicable segregation
requirements for such funds and securities even if regulations or laws
would permit the customer to ``opt out'').
---------------------------------------------------------------------------

    \68\ The report must be dated the same date as the clearing
member's annual audit report (but may be separate from it), and must
be produced in accordance with the standards that the auditor
follows in auditing the clearing member's financial statements.
    This condition requiring the clearing member to convey a third-
party audit report to ICE Trust as a repository for regulators does
not impose upon ICE Trust any independent duty to audit or otherwise
review that information. This condition also does not impose on ICE
Trust any independent fiduciary or other obligation to any customer
of a clearing member.
---------------------------------------------------------------------------

H. Extended and Modified Temporary General Exemption for Certain
Registered Broker-Dealers

    The March 2010 ICE Trust Exemptive Order included limited
exemptions from Exchange Act requirements to registered broker-dealers
in connection with their activities involving Cleared CDS. In crafting
these temporary exemptions, the Commission balanced the need to avoid
creating disincentives to the prompt use of CCPs against the critical
role that certain broker-dealers

play in promoting market integrity and protecting customers (including
broker-dealer customers that are not involved with CDS transactions).
In light of the risk management and systemic benefits in continuing to
facilitate CDS clearing by ICE Trust through targeted exemptions to
registered broker-dealers prior to the effective date of the Dodd-Frank
Act, the Commission finds pursuant to Section 36 of the Exchange Act
that it is necessary or appropriate in the public interest and is
consistent with the protection of investors to exercise its authority
to extend this temporary registered broker-dealer exemption from
certain Exchange Act requirements until July 16, 2011, subject to
certain modifications discussed below.\69\
---------------------------------------------------------------------------

    \69\ The temporary exemptions addressed above--with regard to
ICE Trust, certain clearing members and certain eligible contract
participants--are not available to persons that are registered as
broker-dealers with the Commission (other than those that are notice
registered pursuant to Exchange Act Section 15(b)(11)). Exchange Act
Section 15(b)(11) provides for notice registration of certain
persons that effect transactions in security futures products. 15
U.S.C. 78o(b)(11).
---------------------------------------------------------------------------

    Consistent with the temporary exemptions discussed above, and
solely with respect to Cleared CDS, the Commission is temporarily
exempting registered broker-dealers, including registered broker-
dealers that are also registered as futures commission merchants
pursuant to Section 4f(a)(1) of the CEA (``BD-FCMs''), from provisions
of the Exchange Act and the rules and regulations thereunder that do
not apply to security-based swap agreements, subject to certain
conditions. The Commission is not excluding registered broker-dealers,
including BD-FCMs, from Exchange Act provisions that explicitly apply
in connection with security-based swap agreements or from related
enforcement authority provisions.\70\ As above, and for similar
reasons, the Commission is not exempting registered broker-dealers,
including BD-FCMs, from: Sections 5, 6, 12(a) and (g), 13, 14,
15(b)(4), 15(b)(6), 15(d), 16 and 17A of the Exchange Act.\71\
---------------------------------------------------------------------------

    \70\ See note 28, supra. As noted above, broker-dealers also
would be subject to Section 15(c)(1) of the Exchange Act, which
prohibits brokers and dealers from using manipulative or deceptive
devices, because that provision explicitly applies in connection
with security-based swap agreements. In addition, to the extent the
Exchange Act and any rule or regulation thereunder imposes any other
requirement on a broker-dealer with respect to security-based swap
agreements (e.g., requirements under Rule 17h-1T to maintain and
preserve written policies, procedures, or systems concerning the
broker or dealer's trading positions and risks, such as policies
relating to restrictions or limitations on trading financial
instruments or products), these requirements would continue to apply
to broker-dealers' activities with regard to Cleared CDS.
    \71\ See notes 33 and 34, supra, and accompanying text. We also
are not exempting those members from provisions related to
government securities, as discussed above. See note 37, supra.
---------------------------------------------------------------------------

    Further the Commission is not exempting registered broker-dealers,
including BD-FCMs (except as discussed below), from the following
additional provisions under the Exchange Act: (1) Section 7(c),\72\
regarding the unlawful extension of credit by broker-dealers; (2)
Section 15(c)(3),\73\ regarding the use of unlawful or manipulative
devices by broker-dealers; (3) Section 17(a),\74\ regarding broker-
dealer obligations to make, keep and furnish information; (4) Section
17(b),\75\ regarding broker-dealer records subject to examination; (5)
Regulation T,\76\ a Federal Reserve Board regulation regarding
extension of credit by broker-dealers; (6) Exchange Act Rule 15c3-
1,\77\ regarding broker-dealer net capital; (7) Exchange Act Rule 15c3-
3,\78\ regarding broker-dealer reserves and custody of securities; (8)
Exchange Act Rules 17a-3 through 17a-5,\79\ regarding records to be
made and preserved by broker-dealers and reports to be made by broker-
dealers; and (9) Exchange Act Rule 17a-13,\80\ regarding quarterly
security counts to be made by certain exchange members and broker-
dealers.\81\ Registered broker-dealers, including BD-FCMs (except as
discussed below), must comply with these provisions in connection with
their activities involving non-excluded CDS because these provisions
are especially important to helping protect customer funds and
securities, ensure proper credit practices, and safeguard against fraud
and abuse.\82\
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    \72\ 15 U.S.C. 78g(c).
    \73\ 15 U.S.C. 78o(c)(3).
    \74\ 15 U.S.C. 78q(a).
    \75\ 15 U.S.C. 78q(b).
    \76\ 12 CFR 220.1 et seq.
    \77\ 17 CFR 240.15c3-1.
    \78\ 17 CFR 240.15c3-3.
    \79\ 17 CFR 240.17a-3 through 240.17a-5.
    \80\ 17 CFR 240.17a-13.
    \81\ Solely for purposes of this temporary exemption, in
addition to the general requirements under the referenced Exchange
Act sections, registered broker-dealers shall only be subject to the
enumerated rules under the referenced Exchange Act sections.
    \82\ Indeed, Congress directed the Commission to promulgate
broker-dealer financial responsibility rules, including rules
relating to custody, the use of customer securities, the use of
customers' deposits or credit balances, and the establishment of
minimum financial requirements.
---------------------------------------------------------------------------

    ICE Trust clearing members that are BD-FCMs and that receive or
hold customer funds or securities for the purpose of purchasing,
selling, clearing, settling, or holding CDS positions cleared by ICE
Trust in a futures account (as that term is defined in Rule 15c3-
3(a)(15)) \83\ also shall be exempt from Exchange Act Rule 15c3-3,
subject to conditions that are similar to those--discussed above--that
are applicable to ICE Trust clearing members that are FCMs but are not
registered broker-dealers and that hold customer funds and securities
in connection with Cleared CDS transactions. Thus, such BD-FCMs must be
in material compliance with ICE Trust rules, as well as applicable laws
and regulations relating to capital, liquidity, and segregation of
customers' funds and securities (and related books and records
provisions) with respect to Cleared CDS. A BD-FCM may not receive or
hold funds or securities relating to Cleared CDS transactions and
positions for customers who are natural persons. In addition, the BD-
FCM must make certain risk disclosures to each such customer.\84\
Further, the BD-FCM must hold the customer funds or securities in the
same type of account as is required for other futures commission
merchants that hold customer funds and securities in connection with
Cleared CDS transactions.\85\ The BD-FCM also must segregate the funds
and securities of customers from the ICE Trust clearing member's own
assets (i.e., the member may not permit the customers to ``opt out'' of
applicable segregation requirements for such funds and securities even
if regulations or laws would permit the customer to ``opt out''). In
addition, the BD-FCM also must annually provide ICE Trust with a self-
assessment that it is in compliance with the requirements, along with a
report by the clearing member's independent

third-party auditor that attests to that assessment.\86\
---------------------------------------------------------------------------

    \83\ 17 CFR 240.15c3-3(a)(15).
    \84\ The BD-FCM must disclose that U.S. broker-dealer
segregation requirements and protections under the Securities
Investor Protection Act will not apply to any funds or securities
held by the clearing member to collateralize Cleared CDS positions,
and that the applicable insolvency law may affect such customers'
ability to recover funds and securities, or the speed of any such
recovery, in an insolvency proceeding.
     This BD-FCM condition differs from the analogous disclosure
conditions related to other ICE Trust clearing members that hold
customer funds and securities, in that the other conditions also
require disclosure that the clearing member is not regulated by the
Commission.
    \85\ As with the exemption applicable to those other ICE Trust
clearing members, in the absence of a 4d order from the CFTC, the
BD-FCM may hold the funds and securities in an account that is part
of a separate account class, specified by CFTC Bankruptcy Rules,
established for a futures commission merchant to hold its customers'
positions in cleared OTC derivatives (and funds and securities
posted to margin, guarantee, or secure such positions). See Part
II.G, supra.
    \86\ The report must be dated the same date as the clearing
member's annual audit report (but may be separate from it), and must
be produced in accordance with the standards that the auditor
follows in auditing the clearing member's financial statements. See
text accompanying note 68, supra.
---------------------------------------------------------------------------

    Finally--and in addition to the conditions that are applicable to
ICE Trust clearing members that are not broker-dealers and that hold
customer funds and securities in connection with Cleared CDS
transactions--the ICE Trust clearing member must comply with the margin
rules for Cleared CDS of the self-regulatory organization that is its
designated examining authority \87\ (e.g., FINRA).
---------------------------------------------------------------------------

    \87\ See 17 CFR 240.17d-1 for a description of a designated
examining authority.
---------------------------------------------------------------------------

I. Solicitation of Comments

    When the Commission granted the March 2010 ICE Trust Exemptive
Order extending the exemptions granted in connection with CDS clearing
by ICE Trust, it requested comment on all aspects of the exemptions.
The Commission received one comment in response to this request.\88\
---------------------------------------------------------------------------

    \88\ See Comment from Alessandro Cocco, Managing Director and
Associate General Counsel, JP Morgan, Mar. 2, 2010, suggesting that
customers' variation margin should not be required to be held in a
segregated account. We also solicited comments earlier as part of
the December 2009 ICE Trust Order and the March 2009 ICE Trust
Order. We received one comment in response to our request to the
December 2009 ICE Trust Order, see Comment from Kristie L. Lovelady,
Dec. 9, 2009, requesting stronger restrictions generally, and no
comments in response to our request to the March 2009 ICE Trust
Order.
---------------------------------------------------------------------------

    In connection with this Order extending the exemptions granted in
connection with CDS clearing by ICE Trust, the Commission reiterates
the request for comments on all aspects of the exemptions.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-05-09 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov/). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number S7-05-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/other.shtml). Comments are
also available for Web site viewing and printing in the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549, on
official business days between the hours of 10 a.m. and 3 p.m. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.

III. Conclusion

    It is hereby ordered, pursuant to Section 36(a) of the Exchange
Act, that, until July 16, 2011:
    (a) Exemption from Section 17A of the Exchange Act.
    ICE Trust U.S. LLC (ICE Trust U.S. LLC and any successor entity
thereto is hereinafter referred to as ``ICE Trust'') \89\ shall be
exempt from Section 17A of the Exchange Act solely to perform the
functions of a clearing agency for Cleared CDS (as defined in paragraph
(g)(1) of this Order), subject to the following conditions:
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    \89\ ICE Trust has stated it intends to apply to the CFTC for
registration as a derivatives clearing organization (``DCO'') in
advance of the Dodd-Frank Act implementation date to facilitate
implementation of the Dodd-Frank Act requirements. ICE Trust has
also indicated it may accomplish this transition by establishing a
new entity registered as a DCO and either merging ICE Trust into the
new DCO entity or transferring the assets and liabilities of ICE
Trust to the new DCO entity. See November 2010 Request, supra note
4.
---------------------------------------------------------------------------

    (1) ICE Trust shall make available on its Web site its annual
audited financial statements.
    (2) ICE Trust shall keep and preserve at least one copy of all
documents, including all correspondence, memoranda, papers, books,
notices, accounts, and other such records as shall be made or received
by it relating to its Cleared CDS clearance and settlement services.
These records shall be kept for at least five years and for the first
two years shall be held in an easily accessible place.
    (3) ICE Trust shall supply information and periodic reports
relating to its Cleared CDS clearance and settlement services as may be
reasonably requested by the Commission, and shall provide access to the
Commission to conduct on-site inspections of all facilities (including
automated systems and systems environment), records, and personnel
related to ICE Trust's Cleared CDS clearance and settlement services.
    (4) ICE Trust shall notify the Commission, on a monthly basis, of
any material disciplinary actions taken against any of its members
utilizing its Cleared CDS clearance and settlement services, including
the denial of services, fines, or penalties. ICE Trust shall notify the
Commission promptly when ICE Trust involuntarily terminates the
membership of an entity that is utilizing ICE Trust's Cleared CDS
clearance and settlement services. Both notifications shall describe
the facts and circumstances that led to ICE Trust's disciplinary
action.
    (5) ICE Trust shall notify the Commission of all changes to rules,
procedures, and any other material events affecting its Cleared CDS
clearance and settlement services, including its fee schedule and
changes to risk management practices, the day before effectiveness or
implementation of such rule changes or, in exigent circumstances, as
promptly as reasonably practicable under the circumstances. All such
rule changes will be posted on ICE Trust's Web site. Such notifications
will not be deemed rule filings that require Commission approval.
    (6) ICE Trust shall provide the Commission with reports prepared by
independent audit personnel that are generated in accordance with risk
assessment of the areas set forth in the Commission's Automation Review
Policy Statements. ICE Trust shall provide the Commission (beginning in
its first year of operation) with its annual audited financial
statements prepared by independent audit personnel.
    (7) ICE Trust shall report all significant systems outages to the
Commission. If it appears that the outage may extend for 30 minutes or
longer, ICE Trust shall report the systems outage immediately. If it
appears that the outage will be resolved in less than 30 minutes, ICE
Trust shall report the systems outage within a reasonable time after
the outage has been resolved.
    (8) ICE Trust, directly or indirectly, shall make available to the
public on terms that are fair and reasonable and not unreasonably
discriminatory: (i) all end-of-day settlement prices and any other
prices with respect to Cleared CDS that ICE Trust may establish to
calculate mark-to-market margin requirements for ICE Trust clearing
members; and (ii) any other pricing or valuation information with
respect to Cleared CDS as is published or distributed by ICE Trust.

    (9) If any ICE Trust clearing member that receives or holds funds
or securities for the purpose of purchasing, selling, clearing,
settling, or holding Cleared CDS for other persons is a broker or
dealer registered under Section 15(b) of the Exchange Act (other than
paragraph (11) thereof), and is permitted under FINRA rules to use the
applicable margin pursuant to ICE Trust rules as a minimum for
computing customer or broker-dealer margin, ICE Trust shall not
materially change its methodology for determining Cleared CDS margin
levels without prior written approval from the Commission staff, and
from FINRA with respect to customer margin requirements that would
apply to broker-dealers.
    (b) Exemption from Sections 5 and 6 of the Exchange Act.
    (1) ICE Trust shall be exempt from the requirements of Sections 5
and 6 of the Exchange Act and the rules and regulations thereunder in
connection with its calculation of mark-to-market prices for open
positions in Cleared CDS, subject to the following conditions:
    (i) ICE Trust shall report the following information with respect
to the calculation of mark-to-market prices for Cleared CDS to the
Commission within 30 days of the end of each quarter, and preserve such
reports during the life of the enterprise and of any successor
enterprise:
    (A) The total dollar volume of transactions executed during the
quarter, broken down by reference entity, security, or index; and
    (B) The total unit volume and/or notional amount executed during
the quarter, broken down by reference entity, security, or index;
    (ii) ICE Trust shall establish and maintain adequate safeguards and
procedures to protect clearing members' confidential trading
information. Such safeguards and procedures shall include:
    (A) Limiting access to the confidential trading information of
clearing members to those employees of ICE Trust who are operating the
system or responsible for its compliance with this exemption or any
other applicable rules; and
    (B) Establishing and maintaining standards controlling employees of
ICE Trust trading for their own accounts. ICE Trust must establish and
maintain adequate oversight procedures to ensure that the safeguards
and procedures established pursuant to this condition are followed; and
    (iii) ICE Trust shall satisfy the conditions of the temporary
exemption from Section 17A of the Exchange Act set forth in paragraphs
(a)(1)-(9) of this Order.
    (2) Any ICE Trust clearing member shall be exempt from the
requirements of Section 5 of the Exchange Act to the extent such ICE
Trust clearing member uses any facility of ICE Trust to effect any
transaction in Cleared CDS, or to report any such transaction, in
connection with ICE Trust's clearance and risk management process for
Cleared CDS.
    (c) Exemption for ICE Trust, certain ICE Trust clearing members,
and certain eligible contract participants.
    (1) Persons eligible. The exemption in paragraph (c)(2) is
available to:
    (i) ICE Trust; and
    (ii) Any eligible contract participant (as defined in Section
1a(12) of the Commodity Exchange Act as in effect on the date of this
Order (other than a person that is an eligible contract participant
under paragraph (C) of that section)), including any ICE Trust clearing
member, other than:
    (A) An eligible contract participant that is a self-regulatory
organization, as that term is defined in Section 3(a)(26) of the
Exchange Act;
    (B) A broker or dealer registered under Section 15(b) of the
Exchange Act (other than paragraph (11) thereof); or
    (C) A futures commission merchant registered pursuant to Section
4f(a)(1) of the Commodity Exchange Act that receives or holds funds or
securities for the purpose of purchasing, selling, clearing, settling,
or holding Cleared CDS for other persons.
    (2) Scope of exemption.
    (i) In general. Subject to the conditions specified in paragraph
(c)(3) of this subsection, such persons generally shall, solely with
respect to Cleared CDS, be exempt from the provisions of the Exchange
Act and the rules and regulations thereunder that do not apply in
connection with security-based swap agreements. Accordingly, under this
exemption, those persons remain subject to those Exchange Act
requirements that explicitly are applicable in connection with
security-based swap agreements (i.e., paragraphs (2) through (5) of
Section 9(a), Section 10(b), Section 15(c)(1), paragraphs (a) and (b)
of Section 16, Section 20(d) and Section 21A(a)(1) and the rules
thereunder that explicitly are applicable to security-based swap
agreements). All provisions of the Exchange Act related to the
Commission's enforcement authority in connection with violations or
potential violations of such provisions also remain applicable.
    (ii) Exclusions from exemption. The exemption in paragraph
(c)(2)(i), however, does not extend to the following provisions under
the Exchange Act:
    (A) Paragraphs (42), (43), (44), and (45) of Section 3(a);
    (B) Section 5;
    (C) Section 6;
    (D) Section 12 and the rules and regulations thereunder;
    (E) Section 13 and the rules and regulations thereunder;
    (F) Section 14 and the rules and regulations thereunder;
    (G) The broker-dealer registration requirements of Section
15(a)(1), and the other requirements of the Exchange Act (including
paragraphs (4) and (6) of Section 15(b)) and the rules and regulations
thereunder that apply to a broker or dealer that is not registered with
the Commission;
    (H) Section 15(d) and the rules and regulations thereunder;
    (I) Section 15C and the rules and regulations thereunder;
    (J) Section 16 and the rules and regulations thereunder; and
    (K) Section 17A (other than as provided in paragraph (a)).
    (3) Conditions for ICE Trust clearing members.
    (i) Any ICE Trust clearing member relying on this exemption must be
in material compliance with the rules of ICE Trust.
    (ii) Any ICE Trust clearing member relying on this exemption that
participates in the clearing of Cleared CDS transactions on behalf of
other persons must annually provide a certification to ICE Trust that
attests to whether the clearing member is relying on the exemption from
broker-dealer related requirements set forth in paragraph (d) of this
Order.
    (d) Exemption from broker-dealer related requirements for certain
ICE Trust clearing members and certain eligible contract participants.
    (1) Persons eligible. The exemption in paragraph (d)(2) is
available to:
    (i) Any ICE Trust clearing member (other than one that is
registered as a broker or dealer under Section 15(b) of the Exchange
Act (other than paragraph (11) thereof) or one that is registered as a
futures commission merchant pursuant to Section 4f(a)(1) of the
Commodity Exchange Act that receives or holds funds or securities for
the purpose of purchasing, selling, clearing, settling, or holding
Cleared CDS for other persons); and
    (ii) Any eligible contract participant that does not receive or
hold funds or securities for the purpose of purchasing, selling,
clearing, settling, or holding Cleared CDS positions for other persons
(other than one that is registered as a broker or dealer under Section
15(b) of

the Exchange Act (other than paragraph (11) thereof)).
    (2) Scope of exemption. The persons described in paragraph (d)(1)
shall, solely with respect to Cleared CDS, be exempt from the broker-
dealer registration requirements of Section 15(a)(1) and the other
requirements of the Exchange Act (other than Sections 15(b)(4) and
15(b)(6)) and the rules and regulations thereunder that apply to a
broker or dealer that is not registered with the Commission, subject to
the conditions set forth in paragraph (d)(3) with respect to ICE Trust
clearing members.
    (3) Conditions for ICE Trust clearing members.
    (i) General condition for ICE Trust clearing members. An ICE Trust
clearing member relying on this exemption must be in material
compliance with the rules of ICE Trust, and also must be in material
compliance with applicable laws and regulations relating to capital,
liquidity, and segregation of customers' funds and securities (and
related books and records provisions) with respect to Cleared CDS.
    (ii) Additional conditions for ICE Trust clearing members that
receive or hold customer funds or securities. Any ICE Trust clearing
member that receives or holds funds or securities for the purpose of
purchasing, selling, clearing, settling, or holding Cleared CDS
positions for U.S. persons (or for any person if the clearing member is
a U.S. clearing member)--other than for an affiliate that controls, is
controlled by, or is under common control with the clearing member--
also shall comply with the following conditions with respect to such
activities:
    (A) The U.S. person (or any person if the clearing member is a U.S.
clearing member) for whom the clearing member receives or holds such
funds or securities shall not be natural persons;
    (B) The clearing member shall disclose to such U.S. person (or to
any such person if the clearing member is a U.S. clearing member) that
the clearing member is not regulated by the Commission and that U.S.
broker-dealer segregation requirements and protections under the
Securities Investor Protection Act will not apply to any funds or
securities held by the clearing member, that the insolvency law of the
applicable jurisdiction may affect such person's ability to recover
funds and securities, or the speed of any such recovery, in an
insolvency proceeding, and, if applicable, that non-U.S. clearing
members may be subject to an insolvency regime that is materially
different from that applicable to U.S. persons;
    (C) As promptly as practicable after receipt, the clearing member
shall transfer such funds and securities (other than those promptly
returned to such other person) to:
    (I) The clearing member's Custodial Client Omnibus Margin Account
at ICE Trust; or
    (II) An account held by a third-party custodian, subject to the
following requirements:
    (a) The funds and securities must be held either:
    (1) In the name of a customer, subject to an agreement to which the
customer, the clearing member and the custodian are parties,
acknowledging that the assets held therein are customer assets used to
collateralize obligations of the customer to the clearing member, and
that the assets held in that account may not otherwise be pledged or
rehypothecated by the clearing member or the custodian; or
    (2) In an omnibus account for which the clearing member maintains a
daily record as to the amount held in the account that is owed to each
customer, and which is subject to an agreement between the clearing
member and the custodian specifying that:
    (i) All assets in that account are held for the exclusive benefit
of the clearing member's customers and are being kept separate from any
other accounts maintained by the clearing member with the custodian;
    (ii) The assets held in that account shall at no time be used
directly or indirectly as security for a loan to the clearing member by
the custodian and shall be subject to no right, charge, security
interest, lien, or claim of any kind in favor of the custodian or any
person claiming through the custodian; and
    (iii) The assets held in that account may not otherwise be pledged
or rehypothecated by the clearing member or the custodian;
    (b) The custodian may not be an affiliated person of the clearing
member (as defined at paragraph (g)(2)); and
    (1) If the custodian is a U.S. entity, it must be a bank (as that
term is defined in section 3(a)(6) of the Exchange Act), have total
capital, as calculated to meet the applicable requirements imposed by
the entity's appropriate regulatory agency (as defined in section
3(a)(34) of the Exchange Act), of at least $1 billion, and have been
approved to engage in a trust business by its appropriate regulatory
agency;
    (2) If the custodian is not a U.S. entity, it must have total
capital, as calculated to meet the applicable requirements imposed by
the foreign financial regulatory authority (as defined in section
3(a)(52) of the Exchange Act) responsible for setting capital
requirements for the entity, equating to at least $1 billion, and
provide the clearing member, the customer and ICE Trust with a legal
opinion providing that the assets held in the account are subject to
regulatory requirements in the custodian's home jurisdiction designed
to protect, and provide for the prompt return of, custodial assets in
the event of the insolvency of the custodian, and that the assets held
in that account reasonably could be expected to be legally separate
from the clearing member's assets in the event of the clearing member's
insolvency;
    (c) Such funds may be invested in Eligible Custodial Assets as that
term is defined in ICE Trust's Custodial Asset Policies; and
    (d) The clearing member must provide notice to ICE Trust that it is
using the third-party custodian to hold customer collateral.
    (D) To the extent there is any delay in transferring such funds and
securities to the third-parties identified in paragraph (C), the
clearing member shall effectively segregate the collateral in a way
that, pursuant to applicable law, is reasonably expected to effectively
protect such funds and securities from the clearing member's creditors.
The clearing member shall not permit such persons to ``opt out'' of
such segregation even if regulations or laws otherwise would permit
such ``opt out.''
    (E) The clearing member annually must provide ICE Trust with
    (I) An assessment by the clearing member that it is in compliance
with all the provisions of paragraphs (d)(3)(ii)(A) through (D) in
connection with such activities, and
    (II) A report by the clearing member's independent third-party
auditor that attests to, and reports on, the clearing member's
assessment described in paragraph (d)(3)(ii)(E)(I) and that is
    (a) Dated as of the same date as, but which may be separate and
distinct from, the clearing member's annual audit report;
    (b) Produced in accordance with the auditing standards followed by
the independent third party auditor in its audit of the clearing
member's financial statements.
    (F) The clearing member shall provide the Commission (upon request
or pursuant to agreements reached between the Commission or the U.S.
Government and any foreign securities authority (as defined in Section
3(a)(50) of the Exchange Act)) with any information or documents within
the possession, custody, or control of the

clearing member, any testimony of personnel of the clearing member, and
any assistance in taking the evidence of other persons, wherever
located, that the Commission requests and that relates to Cleared CDS
transactions, except that if, after the clearing member has exercised
its best efforts to provide the information, documents, testimony, or
assistance, including requesting the appropriate governmental body and,
if legally necessary, its customers (with respect to customer
information) to permit the clearing member to provide the information,
documents, testimony, or assistance to the Commission, the clearing
member is prohibited from providing this information, documents,
testimony, or assistance by applicable foreign law or regulations, then
this exemption shall no longer be available to the clearing member.
    (e) Exemption for certain ICE Trust clearing members registered as
futures commission merchants.
    Any ICE Trust clearing member registered as a futures commission
merchant pursuant to Section 4f(a)(1) of the Commodity Exchange Act
(but that is not registered as a broker or dealer under Section 15(b)
of the Exchange Act (other than paragraph (11) thereof)) that receives
or holds funds or securities for the purpose of purchasing, selling,
clearing, settling, or holding Cleared CDS for other persons shall be
exempt from the provisions of the Exchange Act and the rules and
regulations thereunder specified in paragraph (c)(2), and from the
broker-dealer registration requirements of Section 15(a)(1) and the
other requirements of the Exchange Act (other than Sections 15(b)(4)
and 15(b)(6)) and the rules and regulations thereunder that apply to a
broker or dealer that is not registered with the Commission, solely
with respect to Cleared CDS, subject to the following conditions:
    (1) The clearing member shall be in material compliance with the
rules of ICE Trust and also shall be in material compliance with
applicable laws and regulations, relating to capital, liquidity, and
segregation of customers' funds and securities (and related books and
records provisions) with respect to Cleared CDS;
    (2) The customers for whom the clearing member receives or holds
such funds or securities shall not be natural persons;
    (3) The clearing member shall disclose to such customers that the
clearing member is not regulated by the Commission, that U.S. broker-
dealer segregation requirements and protections under the Securities
Investor Protection Act will not apply to any funds or securities held
by the clearing member to collateralize Cleared CDS positions, and that
the applicable insolvency law may affect such customers' ability to
recover funds and securities, or the speed of any such recovery, in an
insolvency proceeding;
    (4) Customer funds and securities received or held by the clearing
member for the purpose of purchasing, selling, clearing, settling, or
holding Cleared CDS positions for such customers shall be held in one
of the following manners:
    (i) In an account established in accordance with section 4d of the
Commodity Exchange Act and CFTC Rules 1.20 through 1.30 and 1.32 [17
CFR 1.20 through 1.30 and 1.32] thereunder; or
    (ii) In the absence of an Order from the Commodity Futures Trading
Commission (``CFTC'') permitting the use of an account specified in
subparagraph (e)(4)(i) for holding such funds and securities, in an
account that is part of a separate account class, specified by CFTC
Bankruptcy Rules [17 CFR 190.01 et seq.], established for a futures
commission merchant to hold its customers' positions in cleared OTC
derivatives (and funds and securities posted to margin, guarantee, or
secure such positions);
    (5) The clearing member annually shall provide ICE Trust with
    (i) An assessment by the clearing member that it is in compliance
with subparagraph (e)(4) in connection with such activities, and
    (ii) A report by the clearing member's independent third-party
auditor that attests to, and reports on, the clearing member's
assessment described in subparagraph (e)(5)(i) and that is:
    (A) Dated as of the same date as, but which may be separate and
distinct from, the clearing member's annual audit report; and
    (B) Produced in accordance with the auditing standards followed by
the independent third-party auditor in its audit of the clearing
member's financial statements.
    (6) To the extent that the clearing member receives or holds funds
or securities of customers for the purpose of purchasing, selling,
clearing, settling, or holding Cleared CDS positions, the clearing
member shall segregate such funds and securities of customers from the
clearing member's own assets (i.e., the member may not permit such
customers to ``opt out'' of applicable segregation requirements for
such funds and securities even if regulations or laws would permit the
customer to ``opt out'').
    (f) Exemption for certain registered broker-dealers.
    (1) In general. A broker or dealer registered under Section 15(b)
of the Exchange Act (other than paragraph (11) thereof) shall be exempt
from the provisions of the Exchange Act and the rules and regulations
thereunder specified in paragraph (c)(2), solely with respect to
Cleared CDS, except:
    (i) Section 7(c);
    (ii) Section 15(c)(3);
    (iii) Section 17(a);
    (iv) Section 17(b);
    (v) Regulation T, 12 CFR 200.1 et seq.;
    (vi) Rule 15c3-1;
    (vii) Rule 15c3-3;
    (viii) Rule 17a-3;
    (ix) Rule 17a-4;
    (x) Rule 17a-5; and
    (xi) Rule 17a-13.
    (2) Broker-dealers that also are futures commission merchants. An
ICE Trust clearing member that is a broker or dealer registered under
Section 15(b) of the Exchange Act (other than paragraph (11) thereof)
and that is also registered as a futures commission merchant pursuant
to Section 4f(a)(1) of the Commodity Exchange Act and that receives or
holds customer funds and securities for the purpose of purchasing,
selling, clearing, settling, or holding Cleared CDS in a futures
account (as that term is defined in Rule 15c3-3(a)(15) [17 CFR
240.15c3-3(a)(15)]) also shall be exempt from Exchange Act Rule 15c3-3,
subject to the following conditions:
    (i) The clearing member shall comply with the conditions set forth
in paragraphs (e)(1), (2), (4), (5), and (6) above;
    (ii) The clearing member shall disclose to Cleared CDS customers
that the U.S. broker-dealer segregation requirements and protections
under the Securities Investor Protection Act will not apply to funds or
securities held by the clearing member to collateralize Cleared CDS
positions, and that the applicable insolvency law may affect such
customers' ability to recover funds and securities, or the speed of any
such recovery, in an insolvency proceeding; and
    (iii) The clearing member shall collect from each customer the
amount of margin that is not less than the amount required for Cleared
CDS under the margin rule of the self-regulatory organization that is
its designated examining authority.
    (g) Definitions.
    (1) For purposes of this Order, the term ``Cleared CDS'' shall mean
a credit default swap that is submitted (or offered, purchased, or sold
on terms providing for submission) to ICE Trust, that is offered only
to, purchased only by, and sold only to eligible contract

participants (as defined in Section 1a(12) of the Commodity Exchange
Act as in effect on the date of this Order (other than a person that is
an eligible contract participant under paragraph (C) of that section)),
and in which:
    (i) The reference entity, the issuer of the reference security, or
the reference security is one of the following:
    (A) An entity reporting under the Exchange Act, providing
Securities Act Rule 144A(d)(4) information, or about which financial
information is otherwise publicly available;
    (B) A foreign private issuer whose securities are listed outside
the United States and that has its principal trading market outside the
United States;
    (C) A foreign sovereign debt security;
    (D) An asset-backed security, as defined in Regulation AB, issued
in a registered transaction with publicly available distribution
reports; or
    (E) An asset-backed security issued or guaranteed by Fannie Mae,
Freddie Mac or Ginnie Mae; or
    (ii) The reference index is an index in which 80 percent or more of
the index's weighting is comprised of the entities or securities
described in subparagraph (1).
    (2) For purposes of this Order, the term ``Affiliated Person of the
Clearing Member'' shall mean any person who directly or indirectly
controls a clearing member or any person who is directly or indirectly
controlled by or under common control with the clearing member.
Ownership of 10 percent or more of the common stock of the relevant
entity will be deemed prima facie control of that entity.

IV. Paperwork Reduction Act

    Certain provisions of this Order contain ``collection of
information requirements'' within the meaning of the Paperwork
Reduction Act of 1995.\90\ The Commission has submitted the proposed
amendments to the Office of Management and Budget (``OMB'') for review
in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number.
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    \90\ 44 U.S.C. 3501 et seq.
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A. Collection of Information

    The Commission found it to be necessary or appropriate in the
public interest and consistent with the protection of investors to
grant the conditional temporary exemptions discussed in this Order
until July 16, 2011. Among other things, the Order would require
certain ICE Trust clearing members that receive or holds customers'
funds or securities for the purpose of purchasing, selling, clearing,
settling, or holding Cleared CDS positions to: (i) Provide ICE Trust
with certain certifications/notifications, (ii) make certain
disclosures to cleared CDS customers, (iii) enter into certain
agreements to protect customer assets, (iv) maintain a record of each
customer's share of assets maintained in an omnibus account, and (v)
obtain a separate report, as part of its annual audit report, as to its
compliance with the conditions of the ICE Trust Order regarding
protection of customer assets. The Order also would require certain ICE
Trust clearing members that receive or hold customers' funds or
securities for the purpose of purchasing, selling, clearing, settling,
or holding Cleared CDS positions to: (a) Make certain disclosures to
those customers; and (b) provide ICE Trust with a self-assessment as to
its compliance with certain exemptive conditions, and obtain a separate
report, as part of its annual audit report, as to its compliance with
the conditions of the Order regarding protection of customer assets.

B. Proposed Use of Information

    These collection of information requirements are designed, among
other things, to inform cleared CDS customers that their ability to
recover assets placed with the clearing member are dependent on the
applicable insolvency regime, provide Commission staff with access to
information regarding whether clearing members are complying with the
conditions of the ICE Trust order, and provide documentation helpful
for the protection of cleared CDS customers' funds and securities.

C. Respondents

    Based on conversations with industry participants, the Commission
understands that approximately 14 firms may be presently engaged as CDS
dealers and thus may seek to be a clearing member of ICE Trust. In
addition, 6 more firms may enter into this business. Consequently, the
Commission estimates that ICE Trust, like the other CCPs that clear CDS
transactions, may have up to 20 clearing members.

D. Total Annual Reporting and Recordkeeping Burden

    Paragraph III.(c)(3)(ii) of this Order requires any ICE Trust
clearing member relying on the exemptive relief specified in paragraph
(c) that participates in the clearing of cleared CDS transactions on
behalf of other persons to annually provide a certification to ICE
Trust that attests to whether the clearing member is relying on the
exemption from broker-dealer related requirements set forth in
paragraph (d) of that Order. The Commission estimates that it would
take a clearing member approximately one half hour each year to
complete the certification and provide it to ICE Trust, resulting in an
aggregate burden of 10 hours per year for all 20 clearing members to
comply with this requirement on an annual basis.\91\
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    \91\ 10 hours = (20 clearing members x \1/2\ hour per clearing
member). This estimate is based on burden estimates published with
respect to other Commission actions that contained similar
certification requirements (see e.g., Exchange Act Release No. 41661
(Jul 27, 1999) (64 FR 42012 (Aug. 3, 1999)), and the burden
associated with the Year 2000 Operational Capability Requirements,
including notification and certifications required by Rule 15b7-
3T(e).
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    Paragraph III.(d)(3)(ii)(C)(II)(d) of this Order requires that a
clearing member notify ICE Trust if it is using a third-party custodian
to hold customer collateral. The Commission estimates that it would
take a clearing member approximately one half hour each year to draft a
notification and provide it to ICE Trust, which would result in an
aggregate burden of 10 hours per year for all 20 clearing members to
comply with this requirement on an annual basis.\92\
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    \92\ Id.
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    Paragraph III.(d)(3)(ii)(B) of this Order requires an ICE Trust
clearing member to disclose to its U.S. customers \93\ that it is not
regulated by the Commission and that U.S. broker-dealer segregation
requirements and protections under the Securities Investor Protection
Act will not apply to any funds or securities it holds, that the
insolvency law of the applicable jurisdiction may affect the customers'
ability to recover funds and securities, or the speed of any such
recovery, in an insolvency proceeding, and, if it is not a U.S. entity,
that it may be subject to an insolvency regime that is materially
different from that applicable to U.S. persons. The Commission believes
that clearing members could use the language in the ICE Trust order
that describes the disclosure that must be made as a template to draft
the disclosure. Consequently the Commission estimates, based on staff
experience, that it would take a clearing member approximately one hour
to draft the disclosure. Further, the Commission believes clearing
members will include this disclosure with other documents or agreements
provided to cleared CDS customers and a clearing member may take
approximately one half hour to

determine how the disclosure should be integrated into those other
documents or agreements, resulting in a one-time aggregate burden of 30
hours for all 20 clearing members to comply with this requirement.\94\
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    \93\ If the clearing member is a U.S. entity, it must make this
disclosure to all of its customers.
    \94\ 30 hours = (1 hour per clearing member to draft the