[Federal Register Volume 87, Number 105 (Wednesday, June 1, 2022)]
[Notices]
[Pages 33223-33226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11677]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94983; File No. SR-ICC-2022-004]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Recovery Plan and 
the ICC Wind-Down Plan

May 25, 2022.

I. Introduction

    On April 1, 2022, CE Clear Credit LCC (``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 to 
amend the ICC Recovery Plan and the ICC Wind-Down Plan (collectively, 
the ``Plans''). The proposed rule change was published for comment in 
the Federal Register on April 14, 2022.\3\ The Commission did not 
receive comments regarding the proposed rule change. For the reasons 
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\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Filing of Proposed Rule Change Relating to the ICC Recovery Plan 
and the ICC Wind-Down Plan, Exchange Act Release No. 94650 (Apr. 8, 
2022); 87 FR 22276 (Apr. 14, 2022) (File No. SR-ICC-2022-004) 
(``Notice'').
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II. Description of the Proposed Rule Change

A. Background

    As a ``covered clearing agency,'' \4\ ICC is required to, among 
other things, ``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 plans for the recovery and orderly wind-down of 
the covered clearing agency necessitated by credit losses, liquidity 
shortfalls, losses from general business risk, or any other losses.'' 
\5\ The Commission has previously clarified that it believes that such 
recovery and wind-down plans are ``rules'' within the meaning of 
Exchange Act Section 19(b) and Rule 19b-4 thereunder because such plans 
would constitute changes to a stated policy, practice, or 
interpretation of a covered clearing agency.\6\ Accordingly, a covered 
clearing agency, such as ICC, is required to file its plans for 
recovery and orderly wind-down with the Commission.\7\ Recovery and 
Wind-Down Plans have been in place at ICC for a number of years and 
approved by the Commission on May 10, 2021 for the first time since 
becoming a ``covered clearing agency'' under the definition in Rule 
17Ad-22(a)(5).\8\
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    \4\ The term ``covered clearing agency'' is defined in Rule 
17Ad-22(a)(5), 17 CFR 240.17Ad-22(a)(5). ICC became subject to the 
requirements in Rule 17Ad-22(e) with the amendment to the definition 
of the term ``covered clearing agency.'' See Definition of ``Covered 
Clearing Agency,'' Exchange Act Release No. 88616 (Apr. 9, 2020), 85 
FR 28853 (May 14, 2020) (File No. S7-23-16).
    \5\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \6\ Standards for Covered Clearing Agencies, Exchange Act 
Release No. 78961 (Sep. 28, 2016), 81 FR 70786, 70809 (Oct. 13, 
2016) (File No. S7-03-14).
    \7\ ICC became a ``covered clearing agency'' following a change 
in the definition of the term in Rule 17Ad-22(a)(5). The previous 
definition of ``covered clearing agency'' in Rule 17Ad-22(a)(5) 
stated that ``covered clearing agency'' means a designated clearing 
agency or a clearing agency involved in activities with a more 
complex risk profile for which the Commodity Futures Trading 
Commission is not the Supervisory Agency as defined in Section 
803(8) of the Payment, Clearing and Settlement Supervision Act of 
2010 (12 U.S.C. 5461 et seq.). Under this definition, ICC was not a 
covered clearing agency. Under the revised definition, ``covered 
clearing agency'' means a registered clearing agency that provides 
the services of a central counterparty or central securities 
depository. Under the revised definition, ICC is a covered clearing 
agency. See Definition of ``Covered Clearing Agency'', Exchange Act 
Release No. 88616 (Apr. 9, 2020), 85 FR 28853, 28854-55 (May 14, 
2020) (File No. S7-23-16).
    \8\ Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Recovery Plan and 
the ICC Wind-Down Plan, Exchange Act Release No. 91806 (May 10, 
2021), 86 FR 26561 (May 14, 2021) (File No. SR-ICC-2021-005).
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B. Recovery Plan

    The proposed rule change would make general updates to ensure that 
the information in the Recovery Plan is current and relates to changes 
that impacted ICC in the past year.\9\ The Recovery Plan would be 
updated to specify that the information provided is current as of 
December 31, 2021, unless otherwise stated.
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    \9\ The descriptions of the Recovery and Wind-Down Plans are 
substantially excerpted from the Notice. Moreover, capitalized terms 
not otherwise defined herein have the meanings assigned to them in 
ICC Rules (``Rules'') or the Plans.
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    The proposed rule change would make the following updates related 
to ICC's ownership and operations:
     In Section II.A, add one additional entity to the list of 
companies owned by ICC's parent.
     In Section IV.A, adds iTraxx Index Swaptions as an example 
of the Index Swaptions products for which ICC provides clearing 
services.
     In Section IV.D, updates numbers for ICC's revenues, 
volumes, and expenses and includes those for Index Swaptions.
     In Section VI.A, updates locations of facilities and 
personnel headcount and functions.
     In Section X, updates the projected recovery and wind-down 
costs and regulatory capital.
     In Section XI, updates ICC's and ICE Group's financial 
statements.
     In Section XIII, updates the percentages held by financial 
services providers of clearing participant cash and collateral.
    The proposed rule change would also revise Section IV.C.1 to 
reflect (i) the change of the Board size from eleven to nine managers, 
consistent with the

[[Page 33224]]

adoption of the Sixth Amended and Restated Operating Agreement of ICC 
in 2021, (ii) the reduction of the number of independent and non-
independent managers by one, (iii) the revision of manager titles, and 
(iv) the removal of two specific managers.
    The proposed rule change would also change Section IV.C.3 to update 
the description of the responsibilities and membership composition of 
the Participant Review Committee (``PRC'') and Credit Review 
Subcommittee of the PRC (``CRS''), which are internal committees that 
assist in fulfilling counterparty review responsibilities, consistent 
with changes to their charters in 2021. The proposed rule change would 
also make corresponding changes in Section VI.B.1 to describe the 
advisory role of the CRS in making recommendations to the PRC and the 
required role of the PRC in approving FSPs.
    The proposed rule change would also amend Section IV.E.4 to state 
that ICC monitors the FSPs daily, intraday, and monthly, consistent 
with the processes described in the ICC Counterparty Monitoring 
Procedures.
    ICC would revise Section VII.B to remove discussion of a metric no 
longer used to measure ICC's performance, and to update the date of a 
referenced policy.
    Under the proposed rule change, Section VII.C would specify that 
ICC will make required disclosures pursuant to applicable regulations 
once the Recovery Plan is initiated, and would include updated 
regulatory contacts. In Section VIII.B.2, the proposed changes would 
add minor language clarifications in describing the purpose of its 
Liquidity Risk Management Framework. In Section VIII.B.3, the proposed 
changes would make updates regarding the insurance coverage maintained 
at the ICE Group level, which may be used as a recovery tool in a non-
clearing participant default scenario.
    Under the proposed rule change, Section VIII.B.3 would reflect 
updated balance sheet information that demonstrates the ability of 
ICC's parent to make cash infusions to ICC as a recovery tool. 
Relatedly, the proposed rule change would amend the procedures for 
seeking such additional capital, including the individual within the 
ICE Group with whom such discussions would begin. The proposed changes 
would also identify the role of this individual within the ICE Group 
and update the description of the composition of certain ICE Group 
boards. Additionally, the proposed rule change would include updated 
financial information relevant to the efficacy of several other 
recovery tools that may be utilized in a non-clearing participant 
default scenario.
    ICC also proposed minor edits for clarity and consistency. 
Specifically, Section IX would be amended to clarify that the Recovery 
Plan is made available to regulators in accordance with relevant 
regulations, and to incorporate a reference to the ICC Default 
Management Procedures for details on ICC's default management testing. 
Section XIV would include an updated index of exhibits referring to the 
current versions of policies and procedures, consistent with updated 
footnote references. Finally, the proposed rule change would make minor 
typographical fixes in the Recovery Plan as well as conforming changes 
in in the Wind-Down Plan, including updates to entity names, and 
grammatical and formatting changes.

C. Wind-Down Plan

    The proposed rule changes to the Wind-Down Plan are, in large part, 
substantially similar to the proposed changes to the Recovery Plan, 
including general updates, clarifying edits, and amendments to make the 
information in the Wind-Down Plan current and reflect changes that have 
impacted ICC in the past year, including changes to the composition of 
the Board.
    Similar to the Recovery Plan, the document would be amended 
throughout to specify that the information provided is current as of 
December 31, 2021, unless otherwise stated. Under the proposed rule 
change, The Wind-Down Plan would also reflect the addition of one 
entity to the list of companies owned by ICC's parent, as well as 
updates to facilities and personnel information, the financial 
resources available to support wind-down, and the percentages of cash 
and collateral held by FSPs in Appendix C.
    Further, as with the Recovery Plan, the proposed changes to the 
Wind-Down Plan would update the description of the composition of the 
Board to reflect changes from 2021, including changes to the Board size 
from eleven to nine managers and revisions to manager titles. The 
proposed changes also describe procedures for seeking certain required 
consultations or approvals identified in the Wind-Down Plan, including 
the individual within the ICE Group with whom such discussions would 
begin. The proposed changes would identify the role of this individual 
within the ICE Group and include information on the composition of a 
relevant ICE Group board. The proposed changes would also specify that 
ICC will make required disclosures pursuant to applicable regulations 
once the decision to wind-down is made, and update ICC's regulatory 
contacts.
    Finally, Section X would be amended to note that the Wind-Down Plan 
is made available to regulators in accordance with relevant regulations 
and to state broadly that the testing of the Wind-Down Plan considers 
various options. In Section XII, the proposed rule change would update 
the index of exhibits to reflect the current versions of policies and 
procedures.

III. Discussion and 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 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\10\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act \11\ and Rule 17Ad-22(e)(2)(v),\12\ and (e)(3)(ii).\13\
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    \10\ 15 U.S.C. 78s(b)(2)(C).
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ 17 CFR 240.17Ad-22(e)(2) (v).
    \13\ 17 CFR 240.17Ad-22(e)(3)(ii).
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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, as well 
as 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.\14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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    As noted above, the proposed rule changes relate mainly to updating 
the Recovery and Wind-Down Plans with current information about ICC's 
facilities, finances, operations, and Board. The Commission believes 
that by providing updated numbers for ICC's revenues, volumes, and 
expenses, including projected recovery and wind-down costs and 
regulatory capital, the proposed changes will enhance ICC's ability to 
monitor its finances and compare its regulatory capital to its 
estimated recovery and wind-down costs. This in turn will help ensure 
ICC has the financial resources to promptly and accurately clear and 
settle

[[Page 33225]]

transactions during recovery and, if necessary, conduct an orderly 
wind-down.
    Further, the Commission believes that adding iTraxx Index Swaptions 
to the list of Index Swaptions products for which ICC provides clearing 
services, adding the additional entity to the list of ICC parent-owned 
companies, and providing an updated exhibit index will generally 
support those utilizing the Plans by providing users of the Plans a 
current overview of ICC's full operations, including all of its 
businesses and cleared products.
    As noted above, the proposed rule change would also update 
description of the Board size and its composition as well as the 
responsibilities and membership composition of the PRC and CRS. The 
Commission believes that these proposed changes would strengthen the 
Plans by ensuring that they delineate responsible individuals and their 
duties, which will support efficient operation of ICC, including during 
recovery or wind-down by ensuring they reflect the Sixth Amended and 
Restated Operating Agreement of ICC and amended committee charters.
    The proposed rule changes would also state that ICC monitors the 
FSPs daily, intraday, and monthly, consistent with the processes 
described in the ICC Counterparty Monitoring Procedures and update a 
metric used to measure ICC's performance. The Commission believes that 
these changes would enhance ICC's ability to manage its financial 
resources by ensuring they reflect current ICC's Counterparty 
Monitoring Procedures, which in turn will enable ICC to promptly and 
accurately clear and settle securities transactions.
    The Commission believes that the proposed changes to specify that 
ICC will make required disclosures pursuant to applicable regulations 
once the Plans are initiated, update regulatory contacts, and to state 
that the Plans are made available to regulators in accordance with 
relevant regulations enhance ICC's procedures for keeping regulatory 
authorities informed thereby promoting the protection of investors and 
the public interest.
    As noted above, the proposed rule change would also amend the 
procedures for seeking additional capital from ICC's parent by 
including the current individual within the ICE Group with whom such 
discussions would begin. The proposed changes would also include 
procedures for seeking certain required consultations or approvals 
identified in the Wind-Down Plan, including the individual within the 
ICE Group with whom such discussions would begin. The proposed changes 
would identify the role of this individual within the ICE Group. The 
Commission believes that these proposed changes would strengthen the 
plans by ensuring those utilizing them have all of the information 
necessary to carryout recovery or an orderly wind-down, which in turn 
would ensure ICC can promptly and accurately clear and settle trades 
and safeguard of securities and funds which are in its custody or 
control at these times.
    For the reasons stated above, the Commission believes that the 
proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act.\15\
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rules 17Ad-22(e)(2)(v)

    Rules 17Ad-22(e)(2)(v) requires that ICC establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to, as applicable, provide for governance arrangements that 
specify clear and direct lines of responsibility.\16\
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    \16\ 17 CFR 240.17Ad-22(e)(2)(v).
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    The Commission believes that the proposed rule changes help 
contribute to establishing, implementing, maintaining, and enforcing 
written policies and procedures reasonably designed to provide for 
governance arrangements that specify lines of control and 
responsibility because they update the number of board members, board 
composition, titles, and roles of committees.
    The Commission also believes that the proposed changes provide 
clear and direct lines of authority because they identify the 
individual within the ICE Group with whom discussions for seeking 
additional capital in recovery from ICC's parent would begin as well as 
the procedures for seeking certain required consultations or approvals 
identified in the Wind-Down Plan, including the individual within the 
ICE Group with whom such discussions would begin. Further, the 
Commission believes that proposed changes to certain titles of managers 
and the removal of former managers promotes governance arrangements 
that specify lines of control and responsibility by including current 
information about individuals and their roles.
    Therefore, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(e)(2)(v).\17\
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    \17\ 17 CFR 240.17Ad-22(e)(2)(v).
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D. Consistency With Rule 17Ad-22(e)(3)(ii)

    Rule 17Ad-22(e)(3)(ii) requires ICC 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 ICC, which includes plans for the recovery and orderly wind-
down of ICC necessitated by credit losses, liquidity shortfalls, losses 
from general business risk, or any other losses.\18\
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    \18\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The Commission believes that the proposed changes described above 
that would add current financial, personnel, and board information 
support ICC's maintenance of plans for the recovery and orderly wind-
down of ICC with updated accurate information. For instance, the 
Commission believes that current financial information provides 
relevant information to those using the Plans to understand the 
resources available for recovery or an orderly wind-down. Further, the 
Commission believes that current information about the Board, updated 
procedures for seeking additional capital from the ICE Group, and 
updated procedures for seeking required consultations or approvals in a 
wind-down scenario support the utilization of the recovery and wind-
down plans with accurate references to personnel and procedures.
    Therefore, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(e)(3)(ii).\19\
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    \19\ 17 CFR 240.17Ad-22(e)(3)(ii).
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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 the Act, 
and in particular, with the requirements of Section 17A(b)(3)(F) of the 
Act \20\ and Rules 17Ad-22(e)(2)(v) and (e)(3)(ii) thereunder.\21\
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    \20\ 15 U.S.C. 78q-1(b)(3)(F).
    \21\ 17 CFR 240.17Ad-22(e)(2)(v) and (e)(3)(ii).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\22\ that the proposed rule change (SR-ICC-2022-004) be, and hereby is, 
approved.\23\
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    \22\ 15 U.S.C. 78s(b)(2).
    \23\ 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).
    \24\ 17 CFR 200.30-3(a)(12).


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-11677 Filed 5-31-22; 8:45 am]
BILLING CODE 8011-01-P