[Federal Register Volume 86, Number 5 (Friday, January 8, 2021)]
[Notices]
[Pages 1555-1557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00096]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90841; File No. SR-ICC-2020-014]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC Clearing Participant 
Default Management Procedures

January 4, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
December 22, 2020, 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 
primarily by ICC. 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

    The principal purpose of the proposed rule change is to revise the 
ICC Clearing Participant (``CP'') Default Management Procedures 
(``Default Management Procedures''). These revisions do not require any 
changes to the ICC Clearing Rules (the ``Rules'').\3\
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    \3\ Capitalized terms used but not defined herein have the 
meanings specified in 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, ICC included statements 
concerning the purpose of and basis for the proposed rule change, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. 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 revise the Default Management Procedures, which set 
forth ICC's default management process, including the actions taken by 
ICC to determine that a CP is in default as well as the actions taken 
by ICC in connection with such default to close-out the defaulter's 
portfolio. These revisions do not require any changes to ICC's existing 
default management rules or any other procedures as they are limited to 
clarification changes that formalize the process for convening the CDS 
Default Committee remotely and minor updates regarding notifications 
sent as part of the default management process. ICC believes such 
revisions will facilitate the prompt and accurate clearance and 
settlement of securities transactions and derivative agreements, 
contracts, and transactions for which it is responsible. ICC proposes 
to make such changes effective following Commission approval of the 
proposed rule change. The proposed revisions are described in detail as 
follows.
    ICC proposes revisions to Subsection 4.4 (Secure Trading Facility) 
related to convening the ICC CDS Default Committee, which consists of 
trading personnel seconded from CPs to assist with default management. 
The proposed changes specify that ICC may convene its CDS Default 
Committee in a private room at its offices (``Secure Trading 
Facility'') or remotely by teleconference (``Remote Trader 
Consultation'') in the event the committee is unable to meet in person. 
The decision of whether to convene in person or remotely would be made 
by the ICC Chief Risk Officer (``CRO'') and would depend on the 
circumstances at the time of the declaration of the default.
    ICC also proposes updates to Section 6 (Default Declaration). The 
proposed changes to Subsection 6.1.5 (CCO Pre-Declaration Initiated 
Actions) allow the ICC Chief Compliance Officer (``CCO'') to inform the 
Commission and the Commodity Futures Trading Commission (``CFTC'') by 
telephone or email of a potential default and further direct the CCO to 
inform other regulators of the potential default as may be required. 
Amended Subsection 6.4 (Default Declaration Notification) similarly 
directs the CCO to notify other regulators (in addition to the 
Commission and the CFTC) of a default if applicable and includes a 
minor edit to replace ``all'' with ``above'' in the phrase ``CCO 
confirming all notifications.'' The proposed updates to Subsection 
6.5.3 (CRO Post-Declaration Preparation) relate to the CRO's actions to 
convene the CDS Default Committee following a declaration of default, 
including the CRO's determination of whether this committee meets in 
person or remotely, and distinguish certain actions that would be taken 
for an in-person CDS Default Committee meeting.

[[Page 1556]]

The proposed revisions to Subsection 6.5.4 (CCO Post-Declaration 
Actions) make minor clarifications in respect of the notice that the 
CCO provides to the compliance personnel of a CDS Default Committee 
member following a declaration of a default.
    ICC further proposes changes to Section 7 (CDS Default Committee 
Consultation). The proposed changes reference ICC's ability to convene 
the CDS Default Committee remotely. Amended Subsection 7.1 (Convening a 
CDS Default Committee Meeting) formalizes the process for convening a 
CDS Default Committee remotely by teleconference, including how notice 
is provided to CDS Default Committee members and what is included in 
the notice. The changes also distinguish what actions would be taken in 
connection with convening the CDS Default Committee at the Secure 
Trading Facility, by Remote Trader Consultation, or by either means. 
Amended Subsection 7.3 (Initial CDS Default Committee Meeting) 
specifies that certain actions are conducted where technologically 
practicable during the initial CDS Default Committee meeting and 
includes minor grammatical updates, including adding a parenthetical 
and updating the sentence structure for clarity.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\5\ In particular, Section 17A(b)(3)(F) of the Act \6\ 
requires that the rule change be consistent with the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICC, the 
safeguarding of securities and funds in the custody or control of ICC 
or for which it is responsible, and the protection of investors and the 
public interest. 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),\7\ because the proposed rule change enhances ICC's 
ability to manage the risk of a default by formalizing the process for 
convening the CDS Default Committee remotely and including minor 
updates regarding notifications sent as part of the default management 
process. The clarification and clean-up changes ensure that the 
documentation of ICC's Default Management Procedures remains up-to-
date, transparent, and focused on clearly articulating the policies and 
procedures used to support ICC's default management process such that 
ICC can take timely action in case of a default. ICC believes that such 
changes augment ICC's procedures relating to default management and 
enhance ICC's ability to withstand defaults and continue providing 
clearing services, thereby promoting the prompt and accurate clearance 
and settlement of securities transactions, derivatives agreements, 
contracts, and transactions; the safeguarding of securities and funds 
which are in the custody or control of ICC or for which it is 
responsible; and the 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.\8\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ Id.
    \8\ Id.
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    The amendments would also satisfy relevant requirements of Rule 
17Ad-22.\9\ Rule 17Ad-22(e)(2)(i) and (v) \10\ requires each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. The Default Management Procedures 
clearly assign and document responsibility and accountability for 
default management actions and decisions. The proposed changes specify 
that the CRO is responsible for determining whether to convene the CDS 
Default Committee in person or remotely by teleconference. Moreover, 
the proposed revisions continue to allow for feedback from, and 
notification to, relevant stakeholders, such as the CDS Default 
Committee, CPs, and regulators. These governance arrangements are clear 
and transparent, such that information relating to the assignment of 
responsibilities and the requisite involvement of relevant committees 
and ICC personnel is clearly documented. In ICC's view, the proposed 
rule change continues to ensure that ICC maintains policies and 
procedures that are reasonably designed to provide for clear and 
transparent governance arrangements and specify clear and direct lines 
of responsibility, consistent with Rule 17Ad-22(e)(2)(i) and (v).\11\
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    \9\ 17 CFR 240.17Ad-22.
    \10\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \11\ Id.
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    Rule 17Ad-22(e)(4)(ii) \12\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by maintaining additional financial resources at the minimum to enable 
it to cover a wide range of foreseeable stress scenarios that include, 
but are not limited to, the default of the two participant families 
that would potentially cause the largest aggregate credit exposure for 
the covered clearing agency in extreme but plausible market conditions. 
The proposed changes set out procedures for convening the CDS Default 
Committee remotely, which enhances ICC's ability to manage a default if 
circumstances prevent the CDS Default Committee from meeting in person. 
The proposed changes further enhance ICC's procedures for managing a 
default by ensuring that relevant individuals are notified, including 
through additional details on how individuals are notified and what is 
included in the notice, and can take timely action during the default 
management process. As such, the proposed amendments would strengthen 
ICC's ability to maintain its financial resources and withstand the 
pressures of defaults, consistent with the requirements of Rule 17Ad-
22(e)(4)(ii).\13\
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    \12\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \13\ Id.
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    Rule 17Ad-22(e)(13) \14\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to ensure it has the authority and 
operational capacity to take timely action to contain losses and 
liquidity demands and continue to meet its obligations by, at a 
minimum, requiring its participants and, when practicable, other 
stakeholders to participate in the testing and review of its default 
procedures, including any close-out procedures, at least annually and 
following material changes thereto. The proposed changes continue to 
ensure that ICC can take timely action to contain losses and liquidity 
demands

[[Page 1557]]

and continue meeting its obligations in the event of a default, 
including by formalizing and detailing procedures for convening the CDS 
Default Committee remotely, which promotes ICC's ability to efficiently 
and safely manage its close-out process where the CDS Default Committee 
cannot meet in person, thereby enhancing ICC's ability to withstand 
defaults and continue providing clearing services. Additionally, ICC 
believes that the notification related updates and clean-up changes 
further enhance ICC's default management process by ensuring that 
relevant stakeholders receive necessary information and that the 
Default Management Procedures remain up-to-date, clear, and transparent 
to ensure that ICC can take timely action to contain losses and 
liquidity demands and continue meeting its obligations in the event of 
a default. Therefore, ICC believes the proposed rule change is 
consistent with the requirements of Rule 17ad-22(e)(13).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(13).
    \15\ Id.
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(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 changes to 
the Default Management Procedures will apply uniformly across all 
market participants. Therefore, ICC does not believe the amendments 
would impose any burden on competition not necessary or appropriate 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-2020-014 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-2020-014. 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-2020-014 and should be 
submitted on or before January 29, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00096 Filed 1-7-21; 8:45 am]
BILLING CODE 8011-01-P