
[Federal Register Volume 80, Number 179 (Wednesday, September 16, 2015)]
[Notices]
[Pages 55672-55673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23216]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75887; File No. SR-ICC-2015-009]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Amendments No. 1 and 2 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendments No. 1 and 
2, To Revise the ICC Risk Management Framework

September 10, 2015.

I. Introduction

    On May 28, 2015, 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 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to make revisions 
to the ICC Risk Management Framework (SR-ICC-2015-009). The proposed 
rule change was published for comment in the Federal Register on June 
12, 2015.\3\ The Commission did not receive comments on the proposed 
rule change. On July 27, 2015, the Commission extended the time period 
in which to either approve, disapprove, or institute proceedings to 
determine whether to disapprove the proposed rule change to September 
10, 2015.\4\ On September 1, 2015, ICC filed Amendment No. 1 to the 
proposed rule change. On September 8, 2015, ICC filed Amendment No. 2 
to the proposed rule change. As discussed below, Amendments No. 1 and 2 
are intended to provide further clarification to the Initial Rule 
Filing. The Commission is publishing this notice to solicit comments on 
Amendments No. 1 and 2 from interested persons and is approving the 
proposed rule change, as modified by Amendments No. 1 and 2, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-75119 (Jun. 8, 2015), 
80 FR 33573 (Jun. 12, 2015) (SR-ICC-2015-009) (hereinafter referred 
to as the ``Initial Rule Filing'').
    \4\ Securities Exchange Act Release No. 34-75529 (Jul. 27, 
2015), 80 FR 45688 (Jul. 31, 2015) (SR-ICC-2015-009).
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II. Description of the Proposed Rule Change

A. Description of the Initial Rule Filing

    In the Initial Rule Filing, ICC proposed changes to the ICC Risk 
Management Framework to incorporate risk model enhancements related to 
the General Wrong Way Risk (``GWWR'') methodology. More specifically, 
ICC proposed changing the ICC Risk Management Framework to extend the 
GWWR framework to the portfolio level. Currently, there exists no 
Clearing Participant-level cumulative GWWR requirement incorporated in 
the Jump-to-Default calculations. The uncollateralized WWR exposure of 
a Risk Factor needs to exceed its corresponding WWR threshold in order 
to trigger WWR collateralization. According to ICC, the proposed 
enhancement is introduced to account for the potential accumulation of 
portfolio WWR through Risk Factor specific WWR exposures. ICC asserts 
that under the proposed approach, if the cumulative uncollateralized 
exposure exceeds a pre-determined portfolio GWWR threshold, the amount 
above the threshold is collateralized.

B. Description of Amendment No. 1

    On September 1, 2015, ICC filed Amendment No. 1 to the proposed 
rule change. ICC stated that the purpose of the amendment was to 
provide further clarity regarding the risk enhancements described in 
the Initial Rule Filing. ICC proposed to revise its Risk Management 
Framework to include specific language regarding the pre-determined 
portfolio GWWR threshold. Specifically, ICC added clarifying language 
setting the minimum and maximum value of the parameter. According to 
ICC, the value of the parameter must be greater than, or equal to, the 
value of the greatest Risk Factor specific WWR threshold level. ICC 
stated that the parameter is further constrained not to exceed the sum 
of the minimum value and the value of the average of all Risk Factor-
specific WWR thresholds (excluding the greatest Risk Factor specific 
WWR threshold). ICC proposes to set the initial GWWR global parameter 
equal to the minimum value, the greatest Risk Factor specific WWR 
threshold, and will not increase the parameter value prior to March 31, 
2016.
    Additionally, in Amendment No. 1, ICC added clarifying language 
regarding how the Risk Factor specific WWR loss thresholds are 
determined. The proposed revisions clarify that the risk enhancements 
described in the Initial Rule Filing will apply to all products cleared 
by ICC within the Sovereign and Banking \5\ sectors. ICC represented 
that, should it decide to expand its product offering to include credit 
default swap contracts on its Clearing Participant names, it will 
specifically file a separate proposed rule change with the Commission 
regarding the applicability of the GWWR framework to such contracts. 
ICC has also updated its stress testing methodology to include 
additional analysis related to Clearing Participant WWR exposures.
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    \5\ ICC stated that the Banking sector attribution follows the 
Bloomberg Industry Classification system (BICS).
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C. Description of Amendment No. 2

    On September 8, 2015, ICC filed Amendment No. 2 to the proposed 
rule change. ICC stated that the purpose of the amendment was to 
provide further clarity regarding the risk enhancements described in 
the Initial Rule Filing. In Amendment No. 2, ICC revised its Risk 
Management Framework to include specific language regarding the jump-
to-default requirement related to the exposure to single name (``SN'') 
risk factors (``RFs''), which reflect outright and index-derived single 
name positions. Additionally, ICC added language clarifying that the 
GWWR analysis is applied to all cleared SN RFs within the Sovereign and 
Banking sectors, is applicable to post index-decomposition positions 
and reflects the combined exposure resulting from outright and index-
derived SN positions. ICC also added language regarding the 
determination of correlation parameters needed for GWWR computations, 
specifically the quantification of loss-given-default resulting from 
correlated defaults. Finally, ICC updated its Stress Testing Framework 
to include additional analysis related to GWWR exposures for Clearing 
Participants' portfolios. As further described in the Stress Testing 
Framework, a portfolio of highly correlated RFs is created and is 
further subjected to additional stress testing analyses to uncover 
pockets of increased risk due to adverse market realizations for the 
highly correlated factors. ICC has also represented that it intends to 
submit a separate filing regarding its Stress Testing Framework, which 
contains the aforementioned enhanced stress testing analyses.

[[Page 55673]]

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \6\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \7\ requires, among other things, that the rules of a 
clearing agency are designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions and, in 
general, to protect investors and the public interest.
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    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds that ICC's proposed revisions to its Risk 
Management Framework are consistent with the requirements of Section 
17A of the Act \8\ and regulations thereunder applicable to it, 
including the standards under Rule 17Ad-22.\9\ The proposed revisions 
are intended to enhance ICC's risk policies and are expected to impose 
more conservative initial margin requirements to account for the 
potential accumulation of portfolio WWR through Risk Factor specific 
WWR exposures, which ICC represents will enhance its available 
financial resources. The Commission therefore believes that the 
proposal is designed to promote the prompt and accurate clearance and 
settlement of securities transactions and derivative agreements, 
contracts and transactions cleared by ICC and, in general, to protect 
investors and the public interest, consist with Section 17A(b)(3)(F) of 
the Act.\10\ Further, the Commission believes that the proposal is 
reasonably designed to meet the financial resource requirements of Rule 
17Ad-22(b)(3).\11\
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    \8\ 15 U.S.C. 78q-1.
    \9\ 17 CFR 240.17Ad-22.
    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ 17 CFR 240.17Ad-22(b)(3).
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IV. Accelerated Approval of Proposed Rule Change as Modified by 
Amendments No. 1 and 2

    As discussed above, Amendments No. 1 and 2 are intended to provide 
further clarity and specificity regarding the proposed rule change. 
Specifically, the amendments provide further details regarding how ICC 
determines certain relevant parameters in its GWWR framework and 
describe enhancements to ICC's stress testing to monitor GWWR 
exposures. The Commission therefore believes that the modifications by 
Amendments No. 1 and 2 to the Initial Rule Filing are designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions and derivative agreements, contracts and transactions 
cleared by ICC and, in general, to protect investors and the public 
interest, consist with Section 17A(b)(3)(F) of the Act.\12\ Further, 
the Commission believes that the modifications are reasonably designed 
to meet the financial resource requirements of Rule 17Ad-22(b)(3).\13\ 
As interested persons received an opportunity to submit written data, 
views and arguments concerning the Initial Rule Filing for a period of 
21 days after its publication in the Federal Register, and Amendments 
No. 1 and 2 include detail that serves to clarify the Initial Rule 
Filing, the Commission finds good cause, pursuant to Section 
19(b)(2)(C)(iii) of the Act,\14\ to approve the proposed rule change, 
as modified by Amendments No. 1 and 2, prior to the thirtieth day after 
the date of publication of notice of Amendments No. 1 and 2 in the 
Federal Register.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(b)(3).
    \14\ 15 U.S.C. 78s(b)(2)(C)(iii).
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V. 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 rule-comments@sec.gov. Please include 
File Number SR-ICC-2015-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2015-009. 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 Web site (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 Web site 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 Web site at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2015-009 
and should be submitted on or before October 7, 2015.

VI. 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 of the Act \15\ and 
the rules and regulations thereunder.
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    \15\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-ICC-2015-009), as modified 
by Amendments No. 1 and 2, be, and hereby is, approved on an 
accelerated basis.\17\
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    \16\ 15 U.S.C. 78s(b)(2).
    \17\ In approving the proposed rule change, the Commission 
considered the proposed rule change's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-23216 Filed 9-15-15; 8:45 am]
 BILLING CODE 8011-01-P


