[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Notices]
[Pages 67445-67447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28186]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84889; File No. SR-ICC-2018-011]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to ICC's New Initiatives
Approval Policy and Procedural Framework
December 20, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 18, 2018, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission the proposed rule change as
described in Items I, II and III below, which Items have been prepared
by ICC. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
ICC New Initiatives Approval Policy and Procedural Framework (``NIA
Policy''). These revisions do not require any changes to the ICC
Clearing Rules (``Rules'').
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. ICC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICC proposes to formalize its NIA Policy. ICC believes that such a
change will facilitate the prompt and accurate clearance and settlement
of securities transactions and derivative agreements, contracts, and
transactions for which it is responsible. The proposed rule change is
described in detail as follows.
The NIA Policy sets forth ICC's policies and procedures for the
review and approval of certain new initiatives to be offered or
implemented by ICC. The NIA Policy clarifies and harmonizes the
policies, procedures, and documentation for the review and approval of
new initiatives that involve potentially significant changes. The
intention of the NIA Policy is to notify all relevant departments of
the introduction of the new initiative, provide for information sharing
between departments and ensure a thorough understanding of the new
initiative, and establish requirements for the pre-launch verification
and testing of the new initiative.
The NIA Policy includes a list of definitions that serves to
clarify and recognize the projects, key participants, and documents
that are subject to the NIA Policy. New projects that are approved by
the Steering Committee, a management committee responsible for
prioritizing the implementation of initiatives and monitoring and
guiding delivery, and meet the following criteria are defined as New
Initiatives that are subject to the NIA Policy: (1) Involve new and
material modifications to the risk or pricing methodology; (2) involve
potential significant changes to the processing system, ICC Clearing
Rules, or clearing operating procedures; (3) involve new and material
modifications to existing and significant capabilities provided by ICC;
or (4) involve Model Changes \3\ classified as Materiality A under
ICC's Model Validation Framework. The New Initiative Approval Committee
(the ``NIAC'') identifies, reviews, and approves New Initiatives and is
composed of ICC management, including department heads, and
representatives from
[[Page 67446]]
Enterprise Risk, Quality Systems, and Systems Operations. The NIAC also
determines any conditions, limitations, restrictions or pre-conditions
(``Stipulations'') with respect to a New Initiative. The NIAC utilizes
several templates in carrying out its responsibilities, such as a
matrix evidencing that all necessary approvals have been obtained
(``Approvals Matrix''); an assessment describing key risks, mitigation
plans, and residual impact ratings and comments (``Risk Assessment'');
a verification form evidencing that Stipulations have been met and
testing has been completed (``New Initiative Pre-Launch Verification
Form''); and a log tracking the NIAC's identification and review of New
Initiatives (``New Initiative Log'').
---------------------------------------------------------------------------
\3\ Model Changes include new and enhanced risk modeling
components of ICC's risk management system. Depending on how
substantially the Model Change affects the system's assessment of
risk for the related risk driver(s), it is classified as Materiality
A (i.e., substantial impact) or Materiality B (i.e., no substantial
impact).
---------------------------------------------------------------------------
The NIA Policy describes the roles of key participants involved in
the identification, review, and approval of New Initiatives. Key
participants include various departments and their department heads,
who are responsible for completing certain templates, reviewing
proposals for and providing sign-off of New Initiatives, and/or
evaluating New Initiatives for compliance with applicable regulations.
The NIA Policy provides the NIAC with the responsibility and the
authority to identify projects approved by the Steering Committee as
New Initiatives; review New Initiatives with consideration of the
risks, financial impact, legal and regulatory concerns, and strategic
direction of ICC; approve, with Stipulations if appropriate, New
Initiatives; and review New Initiatives post-implementation to
determine compliance with Stipulations. The Chair of the NIAC ensures
compliance with the NIA Policy and is responsible for, among other
things, ensuring appropriate communication and coordination between the
NIAC and the Steering Committee.
The NIAC's identification, review, and approval of New Initiatives
is divided into five steps: Submission, identification, review, pre-
launch verification, and log. The NIA Policy sets out the procedures
for each step and notes the template and standard for review to be used
by the NIAC. The five steps include: (1) Submission of a project
proposal approved by the Steering Committee to the NIAC; (2)
identification of a project as a New Initiative by the NIAC; (3) review
of the New Initiative by the NIAC, (4) pre-launch verification with
evidence of completed testing and implemented Stipulations, along with
a statement of any outstanding post-launch Stipulations; and (5)
documentation of the New Initiative in the New Initiative Log.
The NIA Policy is owned and maintained by the Chair of the NIAC.
Material changes to the NIA Policy, as determined by the Chair of the
NIAC, must be reviewed and approved by the ICC Board. Relevant
templates utilized in the identification, review, and approval of New
Initiatives are attached to the end of the NIA Policy, such as the
Approvals Matrix, Risk Assessment, New Initiative Identification Form
evidencing the identification of a project as a New Initiative by the
NIAC, Charter of the NIAC, New Initiative Log, and New Initiative Pre-
Launch Verification Form.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \4\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, and
to the extent applicable, derivative agreements, contracts and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible; in general, to protect investors and the public interest;
and to comply with the provisions of the Act and the rules and
regulations thereunder. ICC believes that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17(A)(b)(3)(F),\5\ because ICC believes that the proposed rule change
establishes sound policies, practices, and procedures with respect to
the offering or implementation of New Initiatives. Such sound policies,
practices, and procedures are an important component of ICC's ability
to comply with these requirements because disruptions to operations
resulting from a new offering or implementation can impair the prompt
and accurate clearance and settlement of securities transactions,
derivatives agreements, contracts, and transactions; safeguarding of
securities and funds which are in the custody or control of ICC or for
which it is responsible; and protection of investors and the public
interest. Moreover, the NIA Policy improves ICC's ability to assess and
manage risk, including by notifying all relevant departments of the
introduction of the New Initiative, providing for information sharing
between departments and ensuring a thorough understanding of the New
Initiative, and establishing procedures related to pre-launch
verification and testing, thereby enhancing ICC's ability to promote
the prompt and accurate clearance and settlement of securities
transactions, derivatives agreements, contracts, and transactions;
safeguarding of securities and funds which are in the custody or
control of ICC or for which it is responsible; and protection of
investors and the public interest. As such, the proposed rule change is
designed to promote the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions; to contribute to the safeguarding of securities and funds
associated with security-based swap transactions in ICC's custody or
control, or for which ICC is responsible; and, in general, to protect
investors and the public interest within the meaning of Section
17A(b)(3)(F) of the Act.\6\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ Id.
\6\ Id.
---------------------------------------------------------------------------
In addition, the proposed rule change is consistent with the
relevant requirements of Rule 17Ad-22.\7\ Rule 17Ad-22(d)(4) \8\
requires ICC to establish, implement, maintain and enforce written
policies and procedures reasonably designed to, in relevant part,
identify sources of operational risk and minimize them through the
development of appropriate systems, controls, and procedures. The
proposed rule change to formalize the NIA Policy sets forth ICC's
procedures for the identification, review, and approval of New
Initiatives to be offered or implemented by ICC. By establishing
procedures that provide for notification to all relevant departments,
information sharing between departments to ensure a thorough
understanding, establishment of Stipulations, and establishment of
requirements for pre-launch verification and testing with respect to a
New Initiative, ICC believes that it will reduce the likelihood of a
disruption in operations from a New Initiative. Moreover, the
establishment of Stipulations and the review of a New Initiative by the
NIAC, including review of the Risk Assessment and Approvals Matrix and
with consideration of, among other things, the risks, financial impact,
legal and regulatory concerns, and the strategic direction of ICC, will
reduce the risk that a new offering or implementation disrupting system
operations is launched, thereby improving ICC's ability to identify
sources of operational risk and minimize them through the
[[Page 67447]]
development of appropriate systems, controls, and procedures,
consistent with the requirements of Rule 17Ad-22(d)(4).\9\
---------------------------------------------------------------------------
\7\ 17 CFR 240.17Ad-22.
\8\ 17 CFR 240.17Ad-22(d)(4).
\9\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(d)(8) \10\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to have governance arrangements that are clear and transparent
to fulfill the public interest requirements in Section 17A of the
Act.\11\ The NIA Policy clearly assigns and documents responsibility
and accountability for the identification, review, and approval of New
Initiatives by the NIAC, the maintenance of the NIA Policy by the Chair
of the NIAC, and the approval of material changes to the NIA Policy by
the Board. These governance arrangements are clear and transparent,
such that information relating to the assignment of responsibilities
and the requisite involvement of department heads, the NIAC, and the
Board is clearly documented, consistent with the requirements of Rule
17Ad-22(d)(8).\12\
---------------------------------------------------------------------------
\10\ 17 CFR 240.17Ad-22(d)(8).
\11\ 15 U.S.C. 78q-1.
\12\ 17 CFR 240.17Ad-22(d)(8).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed change to
formalize ICC's NIA Policy will apply uniformly across all market
participants. Therefore, ICC does not believe the proposed rule change
imposes any burden on competition that is inappropriate in furtherance
of the purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ICC-2018-011 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-ICC-2018-011. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website 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 10:00 a.m. and
3:00 p.m. Copies of such filings will also be available for inspection
and copying at the principal office of ICE Clear Credit and on ICE
Clear Credit's website at https://www.theice.com/clear-credit/regulation. All comments received will be posted without change.
Persons submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICC-2018-011 and should be
submitted on or before January 18, 2019.
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Brent J. Fields,
Secretary.
[FR Doc. 2018-28186 Filed 12-27-18; 8:45 am]
BILLING CODE 8011-01-P