[Federal Register Volume 84, Number 91 (Friday, May 10, 2019)]
[Notices]
[Pages 20671-20673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09632]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85782; File No. SR-ICEEU-2019-009]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Relating to the ICE Clear Europe 
Operational Risk Management Policy (``ORM Policy'')

May 6, 2019.
    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 May 1, 2019, ICE Clear Europe Limited (``ICE Clear Europe'' or the 
``Clearing House'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes described in Items I, II, 
and III below, which Items have been prepared primarily by ICE Clear 
Europe. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe proposes to formalize its Operational Risk 
Management Policy (``ORM Policy''), which consolidates its practices 
with respect to management of operational risk. The revisions do not 
involve any changes to the ICE Clear Europe Clearing Rules or 
Procedures.\3\
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    \3\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules (the 
``Rules'').
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe 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. ICE Clear Europe has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    ICE Clear Europe is proposing to formalize its ORM Policy which 
sets out the Clearing House's processes for managing operational risks, 
the stakeholders responsible for executing those processes, the 
frequency of review of the policy and the governance and reporting 
lines for the policy.
    The ORM Policy addresses operational risk, which it defines as the 
risk of an event occurring which negatively impacts the achievement of 
business objectives resulting from inadequate or failed internal 
operational controls, people, systems or external events.\4\ The ORM 
Policy establishes an overall process that identifies, assesses, 
responds to, monitors and reports operational risk.
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    \4\ The ORM Policy notes several non-exhaustive examples of 
operational risk, including risks from internal and external fraud, 
employment practices and workplace safety, clients, products and 
business practices, damage to physical assets and business 
disruption and system failures.
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    Risk Identification: Risk identification is performed by the 
business areas and lines exposed to the risk (referred to as ``risk 
owners'') at least once each year, and is overseen by the Risk 
Oversight Department. Risk owners must map their existing processes, 
linking them to business objectives and identify operational risks 
where an event might negatively impact the achievement of a business 
objective. Risk sources must also be identified.
    Risk Assessment: Risk assessment is conducted by the risk owners at 
least once per year in conjunction with risk identification. The 
potential impact of the risk, including its potential severity and 
likelihood, are to be evaluated. More frequent ad hoc assessments may 
be necessary if risks emerge or disappear between annual reviews. For 
most operational risks, control mechanisms may already exist, in which 
case uncontrolled and controlled impacts are measured. Risk owners must 
also assess the sufficiency of existing control mechanisms on a 
quarterly or, if necessary, a more frequent ad hoc basis.
    Risk Response: Risk owners are responsible for proposing and 
implementing remedial actions, which must be approved by the ICE Clear 
Europe Executive Risk Committee (the ``ERC''). Depending upon the 
potential expected impact of the operational risk and the Clearing 
House risk appetite, the four possible responses to a risk are to treat 
or mitigate the risk, tolerate or accept the risk, transfer the risk to 
another party (such as through insurance) or terminate the activity 
carrying the risk.
    Risk Monitoring: Risk owners must monitor the identified 
operational risk daily through the use of key performance indicators, 
key risk indicators and other risk indicators such as their own 
management limits. The Risk Oversight Department itself monitors risks 
daily through risk appetite metrics and management thresholds as well 
as operational incidents raised by the risk owners. Risk owners and the 
Risk Oversight Department also must monitor the performance of control 
mechanisms on a regular and frequent basis.
    Risk Reporting and Oversight: Overall oversight of the policy rests 
with the Audit Committee and Risk Oversight Department. Specifically, 
the results of risk assessments must be reported to the Audit Committee 
and the Board Risk Committee (the ``BRC'') when material changes are 
observed. Control

[[Page 20672]]

assessments and operational incidents must be regularly reported to 
senior management, the Audit Committee and the BRC for appropriate 
action. The BRC and Board will also be informed of relevant incidents 
as part of routine reporting. Operational metrics will be provided to 
the Board and BRC monthly and the ERC daily. The product Risk 
Committees shall also have access to operational metrics following 
their schedule of meetings. Unexpected results of operational metrics 
require escalation and notification to the Board immediately following 
the event. Identified operational risks must also be compared against 
established thresholds and reported to the ERC daily and monthly. The 
ORM Policy itself is subject to review on a biennial basis or in the 
event of a material change.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \5\ and the 
regulations thereunder applicable to it. In particular, Section 
17A(b)(3)(F) of the Act \6\ 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, the safeguarding of securities and funds in the custody 
or control of the clearing agency or for which it is responsible, and 
the protection of investors and the public interest. By formalizing ICE 
Clear Europe's operational risk management and governance process, the 
amendments are intended to enhance ICE Clear Europe's ability to 
identify and respond to operational risks presented by its clearing 
activities. The amendments will thus promote the prompt and accurate 
clearing of cleared contracts and protects investors and the public 
interest in the sound operations of the clearing house. Increasing the 
ability of ICE Clear Europe to identify and respond to operational 
risks may also enhance the safeguarding of securities and funds in the 
custody or control of the Clearing House or for which it is 
responsible, and avoid potential disruption of access to such assets as 
a result of operational risks. Accordingly, the amendments satisfy the 
requirements of Section 17A(b)(3)(F).\7\
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    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    The policy is also consistent with the requirements of Rule 17Ad-
22(e)(17)(i).\8\ The ORM Policy is designed to enhance the ability of 
ICE Clear Europe to identify relevant sources of operational risk, 
monitor them on an ongoing basis and take appropriate action to respond 
to such risks. The amendments will therefore facilitate the ongoing 
identification and mitigation of operational risk, within the meaning 
of Rule 17Ad-22(e)(17)(i).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(17)(i). The rule states that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: Manage the covered clearing agency's operational risks 
by:
    (i) Identifying the plausible sources of operational risk, both 
internal and external, and mitigating their impact through the use 
of appropriate systems, policies, procedures, and controls.
    \9\ 17 CFR 240.17Ad-22(e)(17)(i).
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The amendments 
are being adopted to strengthen the Clearing House's internal 
operational risk management processes and governance and should not 
affect the rights or obligations of Clearing Members. As a result, ICE 
Clear Europe does not believe the amendments will affect the cost of 
clearing for Clearing Members or other market participants, the market 
for cleared services generally or access to clearing by Clearing 
Members or other market participants, or otherwise affect competition 
among Clearing Members or market participants.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed amendments have not been 
solicited or received by ICE Clear Europe. ICE Clear Europe will notify 
the Commission of any written comments received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change

    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 the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.

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-ICEEU-2019-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICEEU-2019-009. 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 Europe and on ICE 
Clear Europe's website at https://www.theice.com/clear-europe/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying

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information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ICEEU-2019-009 and should be submitted 
on or before May 31, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09632 Filed 5-9-19; 8:45 am]
 BILLING CODE 8011-01-P