ICE Clear U.S. Announces New Fees for Collateral and Cash Holdings (with DeWaal Comment)

Claiming that it is responding to new CFTC and international regulatory standards regarding liquidity arrangements, ICE Clear U.S. ("ICUS") announced that it is changing the way members are charged for collateral and cash management activities. Beginning on January 1, 2014, ICUS will assess a 5-basis-point charge on clearing members' U.S. treasury securities balances, calculated daily and accrued monthly. This replaces existing transaction-based fees. Beginning in early 2014, ICUS will utilize external investment managers to manage cash posted by clearing members for initial margin and guaranty fund deposits, and retain a portion of all interest earned on cash balances. ICUS estimates that its cash management expense will be 6 basis points, again, calculated daily and accrued monthly. ICUS warns members that investment returns may be negative in low interest rate environments. Investment returns will be credited to or debited from members on a monthly basis.

DeWaal Comment:ICE Clear U.S. is not the first clearing house to potentially charge clearing members for negative balances on cash. Futures Commission Merchants periodically should be evaluating how they charge their customers for handling non-cash collateral posted as initial margin as well as cash deposits. Few FCMs, if any, have the luxury to lose money on handling their customers' collateral or cash.

See: ICE Notice 13-115.The summary and comment were provided by Gary DeWaal, President of Gary DeWaal Associates LLC.