ICE Notice 13-106: Changes to Clearing Member Guaranty Fund Requirements and MMMF Policy

ICE Clear US ("ICUS") announced that it is in the process of applying to the CFTC to become a Subpart C derivatives clearing organization ("DCO"). If approved, the DCO status will allow ICE to retain its status as a qualified central counterparty ("QCCP").

Under the proposed Subpart C regulations pursuant to CFTC Rule 39 ("Derivatives Clearing Organizations"), a DCO must maintain financial resources sufficient to meet its credit exposure to its clearing members, notwithstanding the default of the two clearing members creating the largest aggregate credit exposure, known as "Cover 2." Therefore, in order for the guaranty fund to meet Cover 2, ICUS will increase the size of the guaranty fund to $450 million, and will increase the amount funded by clearing members from $300 million to $400 million.

Additionally, the proposed rules also require DCOs to maintain "eligible liquidity resources that will enable it to meet intraday, same-day, and multiday obligations to perform settlements with a high degree of confidence under a wide range of stress scenarios of a default by a clearing member." Therefore, the ICUS has decided it will no longer accept money market mutual funds ("MMMFs") as deposits to meet original margin or guaranty fund requirements.

These changes will become effective on January 1, 2014.

See: ICE Notice 13-106.