[Federal Register Volume 88, Number 92 (Friday, May 12, 2023)]
[Notices]
[Pages 30812-30815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10129]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97455; File No. SR-ICC-2023-008]


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

May 8, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on May 
02, 2023, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission (the ``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

    ICC proposes a rule change to update the ICC Clearing Participant 
(``CP'') Default Management Procedures (the ``ICC Default Management 
Procedures''). These revisions do not require any changes to the ICC 
Clearing Rules (the ``Rules'').

[[Page 30813]]

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 update the ICC Clearing Participant Default 
Management Procedures (the ``ICC Default Management Procedures''). The 
ICC Default Management Procedures set forth ICC's default management 
process, including the actions taken by ICC to determine that a CP is 
in default of its obligations to ICC under the Rules, as well as the 
actions taken by ICC in connection with the close-out of the 
defaulter's portfolio (the ``Close-Out''). The proposed revisions are 
designed to address Commission regulatory examination findings related 
to the annual testing of the ICC Recovery Plan and the ICC Wind-Down 
Plan (collectively, the ``Plans'').\3\ The proposed revisions are 
limited to providing additional details with respect to ICC's testing 
of the Plans included in the ICC Default Management Procedures. 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 updates are 
described in detail as follows.
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    \3\ The ICC Recovery Plan and ICC Wind-Down Plan are the plans 
for the recovery and orderly wind-down of ICC necessitated by credit 
losses, liquidity shortfalls, losses from general business risk, or 
other losses.
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    Specifically, ICC purposes to revise the ICC Default Management 
Procedures by adding Section 4.6 Recovery and Wind-Down Tests. Section 
4.6 adds detailed procedures with respect to ICC's annual Recovery and 
Wind-Down testing. ICC conducts Recovery and Wind-Down testing at least 
every twelve months demonstrating ICC's readiness to execute the Plans 
as applicable (i) to address uncovered credit losses, liquidity 
shortfalls and general business risk, operational risk, or any other 
risk that threatens ICC's viability as a going concern, and (ii) in the 
event recovery actions fail to preserve ICC's viability as a going 
concern or ICC makes a business decision to exit all clearing 
activities, to wind-down ICC in an orderly manner (the ``Recovery and 
Wind-Down Test'').
    Proposed Section 4.6 also includes details on how the scope of each 
Recovery and Wind-Down Test is determined. It is the responsibility of 
the ICC Risk Oversight Officer (``ROO'') to plan and coordinate the 
execution of the Recovery and Wind-Down Test, including the 
determination of the scope of the Recovery and Wind-Down Test which 
includes coordination with the ICC Close-Out Team.\4\ Such scope will 
include which recovery and wind-down scenarios will be tested, the 
selected stress scenario(s), and the recovery tools to be tested. In 
the determination of which scenarios and tools are to be tested, ICC 
will give consideration to scenarios, business processes, and tools 
which have not been recently tested. In addition, ICC will consider the 
applicability of new Rules, procedures, or newly implemented ICC 
capabilities (e.g., new cleared contracts). The scope also will include 
all three wind-down options set forth in the ICC Wind-Down Plan. 
Section 4.6 further provides that with respect to the testing of 
business processes and tools to address CP default scenarios, ICC may 
choose to include such testing in ICC's default management tests, and 
testing of non-CP default scenarios will be conducted through a 
separate table-top exercise.
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    \4\ The ICC Close-Out Team is comprised of ICC management, the 
ROO, and the most senior member of the ICC Treasury Department.
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    Furthermore, proposed Section 4.6 assigns responsibility for the 
execution of the Recovery and Wind-Down Test to the ICC Close-Out Team, 
capturing results, and making them available to the ROO. The ROO 
collates the results and, identifies any issues or lessons learned, 
including any revisions that should be made to the ICC Recovery Plan or 
ICC Wind-Down Plan. The ROO collates the information from the Recovery 
and Wind-Down Test into a presentation which is reviewed with the 
Close-Out Team, the ICC Risk Committee and the ICC Board of Managers. 
The ROO maintains a list of work items for the future development and/
or enhancement of the business processes and capabilities necessary to 
execute the ICC Recovery Plan and ICC LLC Wind-Down Plan.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \5\ 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; to assure the safeguarding of securities and funds which 
are in the custody or control of the clearing agency or for which it is 
responsible; in general, to protect investors and the public interest; 
and to comply with the provisions of the Act and the rules and 
regulations thereunder. ICC believes that the proposed additional 
procedural details to ICC's Default Management Procedures included in 
the proposed rule change are 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),\6\ because ICC believes that the 
proposed additional procedural details to ICC's Default Management 
Procedures enhances policies, practices and procedures with respect to 
the testing of ICC Recovery Plan and the ICC Wind-Down Plan. Such sound 
policies, practices and procedures are important to 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.\7\
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
    \7\ Id.
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    In addition, the proposed rule change is consistent with the 
relevant requirements of Rule 17Ad-22.\8\ Rule

[[Page 30814]]

17Ad-22(b)(3) \9\ requires ICC to establish, implement, maintain and 
enforce written policies and procedures reasonably designed to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the two CP families to which it has the largest exposures in extreme 
but plausible market conditions. ICC believes that such changes enhance 
ICC's ability to manage a default by providing additional detail, 
transparency and clarity with respect to ICC's default management rules 
and procedures, thereby ensuring that ICC continues to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the two CP families to which it has the largest exposures in extreme 
but plausible market conditions, consistent with the requirements of 
Rule 17Ad-22(b)(3).\10\
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    \8\ 17 CFR 240.17Ad-22.
    \9\ 17 CFR 240.17Ad-22(b)(3).
    \10\ Id.
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    Rule 17Ad-22(e)(2)(i) and (v) \11\ 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 Recovery and Wind-down Testing 
updates to the ICC Default Management Procedures enhance the clarity 
and transparency of such procedures by providing additional information 
relating to the assignment of responsibilities in the determination of 
the scope of the annual Recovery and Wind-down Test, and the assignment 
of responsibilities in the execution of the annual Recovery and Wind-
Down Test, consistent with the requirements of Rule 17Ad-22(e)(2)(i) 
and (v).\12\
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    \11\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \12\ Id.
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    Rule 17Ad-22(e)(3)(ii) \13\ 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. The Default Management 
Procedures continue to establish ICC's actions to maintain its 
viability as a going concern to address any uncovered credit loss, 
liquidity shortfall, capital inadequacy, or business, operational or 
other structural weakness that threatens ICC's viability. The proposed 
changes to the Default Management Procedures provide additional 
detailed procedures with respect to the annual Recovery and Wind-Down 
testing, improving both the comprehension and transparency of ICC's 
Recovery and Wind-Down testing. In ICC's view, such proposed changes 
will improve ICC's Default Management Procedures and ensure they remain 
comprehensive and useful in providing for ICC's written policies and 
procedures related to ICC's recovery and orderly wind-down, consistent 
with the requirements of Rule 17Ad-22(e)(3)(ii).\14\
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    \13\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \14\ Id.
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    Rule 17Ad-22(e)(13) \15\ 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 to the Default 
Management Procedures enhance the clarity and transparency of such 
procedures by providing additional information relating to the 
assignment of responsibilities in the determination of the scope of the 
annual Recovery and Wind-down Test, and the assignment of 
responsibilities in the execution of the annual Recovery and Wind-Down 
Test. Such proposed changes, therefore, improve the design of ICC's 
annual Recovery and Wind-Down Testing, consistent with the requirements 
of Rule 17ad-22(e)(13).\16\
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    \15\ 17 CFR 240.17Ad-22(e)(13).
    \16\ 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 rule change 
to update the ICC Default Management Procedures 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-2023-008 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-2023-008. 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

[[Page 30815]]

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.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-ICC-2023-008 and should 
be submitted on or before June 2, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-10129 Filed 5-11-23; 8:45 am]
BILLING CODE 8011-01-P