[Federal Register Volume 86, Number 47 (Friday, March 12, 2021)]
[Notices]
[Pages 14163-14165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05133]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91279; File No. SR-ICC-2021-003]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Operational Risk 
Management Framework

March 8, 2021.

I. Introduction

    On January 21, 2021, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change notice to 
revise the ICC Operational Risk Management Framework.\3\ The proposed 
rule change was published for comment in the Federal Register on 
February 5, 2021.\4\ The Commission did not receive comments regarding 
the proposed rule change. For the reasons

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discussed below, the Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Capitalized terms used but not defined herein have the 
meanings specified in ICC's Clearing Rules.
    \4\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Proposed Rule Change Relating to the ICC Operational Risk 
Management Framework, Exchange Act Release No. 91024 (February 1, 
2021); 86 FR 8447 (February 5, 2021) (SR-ICC-2021-003) (``Notice'').
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II. Description of the Proposed Rule Change

    ICC is proposing to revise its Operational Risk Management 
Framework to incorporate reference to the Intercontinental Exchange, 
Inc. (``ICE, Inc.'') Enterprise Risk Management Policy (``ERM Policy'') 
and to ICC's status as a covered clearing agency and the relevant rules 
applicable to ICC as a covered clearing agency relating to operational 
risk requirements, namely Rules 17Ad-22(e)(17) and (21) under the 
Act.\5\
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    \5\ 17 CFR 240.17Ad-22(e)(17) and (21).
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    The proposal would make updates to the risk assessment process in 
the Operational Risk Management Framework, which addresses identifying, 
assessing, monitoring, and mitigating plausible sources of operational 
risk.\6\ Under the ``identify'' component, the proposal would use the 
more general term ``risk-based assessment methodology,'' to replace use 
of the term ``risk-scenario-based assessment methodology.'' \7\ ICC 
proposes similar changes throughout the ``assess'' component to replace 
``risk scenarios'' with ``risks.'' \8\ The proposed changes also cross 
reference the Enterprise Risk Management Policy (``ERM Policy''), 
noting that the ICE, Inc. Enterprise Risk Management Department 
(``ERM'') maintains an inventory of material risks faced by ICC.\9\
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    \6\ Notice, 86 FR at 8447.
    \7\ Id.
    \8\ Id.
    \9\ Id. The ICE, Inc. Enterprise Risk Management Department 
(``ERM'') provides the oversight and framework for identifying, 
assessing, managing, monitoring and reporting on risk across the 
ICE, Inc.'s various business units, including ICC. ERM, in 
conjunction with relevant ICC individuals, oversees the management 
of this Operational Risk Management Framework.
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    Further, under the ``assess'' component, ICC proposes to 
incorporate the ERM Policy and its relevant risk assessment 
guidelines.\10\ ICC also proposes additional information relating to 
the determination of risk ratings for identified risks.\11\ With 
respect to the ``mitigate'' component, the proposed changes cross-
reference relevant guidelines in the ERM Policy and include minor 
updates regarding documenting output and reviewing risk 
assessments.\12\ The proposed changes also update the ``report'' 
component to more clearly state that ERM is responsible for operational 
risk reporting to appropriate parties.\13\
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    \10\ Notice, 86 FR at 8447-8448.
    \11\ Notice, 86 FR at 8448.
    \12\ Id.
    \13\ Id.
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    Appendix 1 of the Operational Risk Management Framework summarizes 
relevant regulatory requirements and industry guidance applicable to 
ICC. The proposal would revise appendix 1 to reference ICC's status as 
a covered clearing agency and to update relevant regulations applicable 
to ICC as a covered clearing agency relating to operational risk,\14\ 
namely Rules 17Ad-22(e)(17) and (21).\15\
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    \14\ Id.
    \15\ 17 CFR 240.17Ad-22(e)(17) and (21).
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III. Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the 
organization.\16\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act \17\ and Rule 17Ad-22(e)(17)(i) thereunder.\18\
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    \16\ 15 U.S.C. 78s(b)(2)(C).
    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ 17 CFR 240.17Ad-22(e)(17)(i).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of ICC 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 ICC or for which it is responsible, and, in 
general, to protect investors and the public interest.\19\
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed above, the proposed rule change would amend the 
Operational Risk Management Framework to explicitly reference the ICE, 
Inc. ERM Policy and the role that the ERM plays in establishing 
guidelines for operational risk management. In particular, the proposed 
rule change would state that the ICE, Inc. ERM Policy provides the Risk 
Assessment guidelines, including how ICC rates, identifies and 
mitigates various risks.
    Additionally, the proposed rule change updates Appendix 1 of the 
Operational Risk Management Framework to state that ICC is a 
``covered'' clearing agency and that it is subject to Rules 17Ad-
22(e)(17) and (21), which require policies and procedures designed to 
manage operational risk.
    As described above, the proposal would update the ICC Operational 
Risk Management Framework to note with more specificity ERM's role in 
ICC's operational risk management and to reference the ERM Policy as a 
source of information for such things as an inventory of material risks 
faced by ICC. With these changes, the Commission believes that ICC's 
Risk Management Framework should better reflect a more comprehensive 
set of the risk assessment standards used by ICC with respect to 
operational risk.
    Further, the Commission believes that by adding references to ICC 
as a ``covered'' clearing agency and that, as such, ICC is subject to 
Rules 17Ad-22(e)(17) and (21), the proposed rule change strengthens the 
Operational Risk Framework by highlighting its specific regulatory 
obligations.
    By enhancing ICC's risk management tools as noted above, the 
Commission finds the proposed rule change would enhance ICC's ability 
to identify and respond to operational risks presented by its clearing 
activities, adhere to specific regulatory requirements and, in turn, 
enhance its ability to avoid disruption to clearing operations and 
address operational risks in a timely fashion. By better positioning 
ICC to continue its critical operations and services and mitigating the 
risk of financial loss contagion that could be caused by ICC's failure, 
the Commission believes that these changes are designed to help 
facilitate prompt and accurate clearance and settlement and assure the 
safeguarding of securities and funds which are in the custody or 
control of ICC. Therefore, the Commission finds the proposed rule 
change is consistent with section 17A(b)(3)(F) of the Act.\20\
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    \20\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With and Rule 17Ad-22(e)(17)(i)

    Rule 17Ad-22(e)(17)(i) requires ICC to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable, manage its operational risks by, among 
other things, 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.\21\
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    \21\ 17 CFR 240.17Ad-22(e)(17)(i).
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    As noted above, the proposed rule change would revise the 
Operational Risk Framework to note that ERM maintains a register of 
material risks faced by ICC. The Commission believes

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that this reference facilitates ICC's ability to more effectively 
identify plausible sources of operational risk, monitor them on an 
ongoing basis, and thus take appropriate and timely action to mitigate 
the impact of these risks. The proposal would further note that ERM 
provides risk assessment guidelines. The Commission believes this 
change also enhances ICC's ability to manage risks by providing clear 
and specific guidance in how to assess and mitigate a particular risk's 
impact once identified.
    The Commission also believes that the regulatory update in Appendix 
1 will strengthen ICC's ability to manage and mitigate operational risk 
by specifically noting the legal standards with respect to operational 
risk applicable to it as a covered clearing agency. In particular, the 
covered clearing agency standards added to the Operational Risk 
Framework address the obligation of ICC to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable, manage operational risk through a system 
for identification and mitigation of risk, ensuring that systems have a 
high degree of operational reliability, and establishment of a business 
continuity plan, as well as procedures for regularly reviewing the 
efficiency and effectiveness of its clearing and settlement 
arrangements, operating structure, products, and use of technology.
    For the reasons stated above, the Commission believes that the 
proposed rule change is consistent with the obligation under Rule 17Ad-
22(e)(17)(i).\22\
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    \22\ 17 CFR 240.17Ad-22(e)(17)(i).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of Section 17A 
of the Act,\23\ and Rule 17Ad-(e)(17)(i) \24\ thereunder.
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    \23\ 15 U.S.C. 78q-1.
    \24\ 17 CFR 240.17Ad-22(e)(17)(i).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\25\ that the proposed rule change (SR-ICC-2021-003), be, and hereby 
is, approved.\26\
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    \25\ 15 U.S.C. 78s(b)(2).
    \26\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05133 Filed 3-11-21; 8:45 am]
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