ICE Trust U.S. LLC has filed in advance with the Commodity Futures Trading Commission (CFTC) to register as a derivatives clearing organization (DCO), saying it was filing early "to promote the public interest in expediting the clearing of OTC derivatives through Commission-regulated DCOs."
Under the new Dodd-Frank financial reform rules, ICE Trust said it would automatically have been brought into the fold at a later time. Acknowledging that the CFTC has not yet released its final rules for DCOs, ICE said it had "attempted to anticipate the application of the [CFTC's] amended core principles to its operation as a DCO." Once the final rules are published the company said it would amend its application as necessary.
ICE Trust is registering as a DCO for clearing over-the-counter (OTC) derivatives, specifically single-name, narrow- and broad-based index and index tranche credit default swaps (CDS).
ICE Trust is currently subject to regulation and supervision by the Federal Reserve System and the New York State Banking Department. After its registration as a DCO, "ICE Trust will undergo a corporate reorganization to 'de-bank,' so it will no longer be subject to bank regulation." The company is applying to extend the exemptive relief for single-name CDS transactions and certain government securities transactions granted by the Securities and Exchange Commission and the Treasury.
ICE Trust U.S., an IntercontinentalExchange central clearing facility, began clearing North American CDS index contracts in March 2009 and began clearing single-name CDS transactions in December 2009. Currently, ICE Trust CDS transactions are conducted on a bilateral basis rather than a centralized exchange. Once the new rules go into effect ICE Trust will accept for clearing CDS transactions executed on qualified swap execution facilities.
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