[Federal Register Volume 86, Number 69 (Tuesday, April 13, 2021)]
[Notices]
[Pages 19316-19318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91493; File No. SR-ICC-2021-008]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC Risk Management 
Model Description

April 7, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 31, 2021, 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 make 
changes to ICC's Risk Management Model Description. These revisions do 
not require any changes to the ICC Clearing Rules (the ``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, 
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 revising its Risk Management Model Description to 
include an enhancement related to the index liquidity charge (``LC'') 
methodology and other clarifications. ICC believes that 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 to amend the ``Initial Margin Methodology'' section of 
the Risk Management Model Description. The proposed changes memorialize 
the review and approval process of the document, which consists of 
review by the Risk Committee and review and approval by the Board at 
least annually.
    ICC proposes to revise the ``Liquidity Charge for Index Risk 
Factors'' subsection (Subsection II.2) to include an enhancement 
related to the index LC methodology. The proposed changes amend a 
formula for the index series LC. Currently, to arrive at the index 
series LC, ICC takes into account the estimated LCs for the instruments 
that belong to the same index series and the sign of the notional 
amount of the instrument. Under the proposed changes, the index series 
LC is established as the more

[[Page 19317]]

conservative liquidity requirement associated with the sum of the 
bought and sold protection position LCs for the instruments that belong 
to the same index series. Such enhancement represents a unification of 
the index LC with the single name and credit default index swaption 
(``Index Option'') \3\ LC methodologies. ICC does not propose any 
further changes to the methodology.
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    \3\ Index Swaptions are also referred to herein and in the Risk 
Management Model Description as ``index options'' or ``index CDS 
options'', or in similar terms.
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    ICC proposes additional clarifications in the Risk Management Model 
Description. In the ``Liquidity Charge for Index Options'' subsection 
(Subsection II.2.1), ICC proposes a clarification with respect to long 
Index Option instruments to specify that the LC combined with the 
integrated spread response requirement will not exceed the end-of-day 
option instrument price. Such amendment reflects the maximum loss 
condition. In the ``Anti-Procyclicality Measures'' subsection 
(Subsection VII.5.3), ICC proposes clarifications regarding the 
scenarios associated with extreme price decreases and extreme price 
increases (the ``Extreme Price Change Scenarios''). Specifically, the 
proposed changes clarify that the extreme price decrease and increase 
scenarios for Index Options incorporate hypothetical forward price 
decreases and increases, respectively. Further, in respect of the 
maximum loss condition, ICC proposes to update formulas related to the 
final portfolio initial margin in the ``Portfolio Loss Boundary 
Condition'' section (Section IX) to incorporate reference to the 
portfolio level integrated spread response.
(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. The proposed amendments include an enhancement related 
to the index LC methodology. Such enhancement represents a unification 
of the index LC with the single name and Index Option LC methodologies, 
which would simplify the LC methodology and promote ease of 
understanding. The proposed rule change would also strengthen the 
governance arrangements set out in the Risk Management Model 
Description by memorializing the review and approval process for the 
document. The proposed clarifications would further ensure readability 
and clarity with respect to ICC's risk methodology in the Risk 
Management Model Description to ensure that it remains up-to-date, 
clear, and transparent to support the effectiveness of ICC's risk 
management system. The proposed rule change is therefore consistent 
with the prompt and accurate clearing and settlement of the contracts 
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, within the meaning of Section 
17A(b)(3)(F) of the Act.\7\
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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.
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    Rule 17Ad-22(e)(2)(i) and (v) \8\ 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. ICC's Risk Management Model Description 
clearly assigns and documents responsibility and accountability for 
risk decisions and requires consultation or approval from relevant 
parties. The proposed changes strengthen the governance procedures and 
arrangements detailed in the Risk Management Model Description by 
memorializing the review and approval of the document by relevant 
groups at least annually. As such, 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).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \9\ Id.
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    Rule 17Ad-22(e)(3)(i) \10\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to maintain a sound risk management 
framework for comprehensively managing legal, credit, liquidity, 
operational, general business, investment, custody, and other risks 
that arise in or are borne by the covered clearing agency, which 
includes risk management policies, procedures, and systems designed to 
identify, measure, monitor, and manage the range of risks that arise in 
or are borne by the covered clearing agency, that are subject to review 
on a specified periodic basis and approved by the Board annually. ICC 
maintains a sound risk management framework that identifies, measures, 
monitors, and manages the range of risks that it faces. The Risk 
Management Model Description is a key aspect of ICC's risk management 
approach, and the proposed amendments would memorialize that the 
document is reviewed by the Risk Committee and reviewed and approved by 
the Board at least annually. As such, the amendments would satisfy the 
requirements of Rule 17Ad-22(e)(3)(i).\11\
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    \10\ 17 CFR 240.17Ad-22(e)(3)(i).
    \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 promote the soundness of the model including by 
enhancing the index LC methodology, such that the index series LC is 
established as the more conservative liquidity requirement associated 
with the sum of the bought and sold protection position LCs for the 
instruments that belong to the same index series. Such enhancement 
represents a unification of the index LC with the single name and Index 
Option LC methodologies, which would simplify the LC methodology and 
promote ease of understanding. ICC proposes additional clarifications 
discussed above related to the maximum loss condition and the Extreme 
Price Change Scenarios. In ICC's view, the proposed changes enhance and 
provide further clarity and transparency on ICC's risk methodology and, 
as such, the proposed amendments would strengthen ICC's ability to 
maintain its financial resources and withstand the pressures of 
defaults,

[[Page 19318]]

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)(6)(i) \14\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, considers, and produces margin levels commensurate with, the 
risks and particular attributes of each relevant product, portfolio, 
and market. As described above, the proposed changes amend a formula 
with respect to the index series LC, which would unify the index LC 
with the single name and Index Option LC methodologies. ICC does not 
propose to otherwise change the methodology. The additional 
clarifications in respect of the maximum loss condition and the Extreme 
Price Change Scenarios further promote clarity and transparency in the 
Risk Management Model Description. ICC believes that the proposed 
changes enhance the margin methodology, which will continue to consider 
and produce margin levels commensurate with the risks and particular 
attributes of each relevant product, portfolio, and market, consistent 
with the requirements of Rule 17Ad-22(e)(6)(i).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(6)(i).
    \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 
ICC's Risk Management Model Description 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-2021-008 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-2021-008. 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-2021-008 and should be 
submitted on or before May 4, 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. 2021-07492 Filed 4-12-21; 8:45 am]
BILLING CODE 8011-01-P