
[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Notices]
[Pages 4570-4571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02452]



[[Page 4570]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85105; File No. SR-ICC-2018-011]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to ICC's New Initiatives 
Approval Policy and Procedural Framework

February 11, 2019.

I. Introduction

    On December 18, 2018, 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\ a 
proposed rule change (SR-ICC-2018-011) to adopt a revised ICC New 
Initiatives Approval Policy and Procedural Framework (``NIA Policy''). 
The proposed rule change was published for comment in the Federal 
Register on December 28, 2018.\2\ The Commission did not receive 
comments on the proposed rule change. For the reasons discussed below, 
the Commission is approving the proposed rule change.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 34-84889 (December 20, 
2018), 83 FR 67445 (December 28, 2018) (SR-ICC-2018-011) 
(``Notice'').
    \3\ Capitalized terms used herein but not otherwise defined have 
the meaning set forth in the NIA Policy or the ICC rulebook, which 
is available at https://www.theice.com/publicdocs/clear_credit/ICE_Clear_Credit_Rules.pdf.
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II. Description of the Proposed Rule Change

    ICC proposes to revise the NIA Policy, which sets forth ICC's 
policies and procedures for the review and approval of certain new 
initiatives to be offered or implemented by ICC.\4\ The NIA Policy 
clarifies and harmonizes the policies, procedures, and documentation 
for the review and approval of new initiatives that involve potentially 
significant changes.\5\ The intention of the NIA Policy is to notify 
all relevant departments of the introduction of the new initiative, 
share information between departments, and establish requirements for 
the pre-launch verification and testing of the new initiative.\6\
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    \4\ Notice, 83 FR at 67445.
    \5\ Id.
    \6\ Id.
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    New projects subject to the NIA policy are those that involve new 
and material changes to the risk or pricing methodology, significant 
changes to the processing system, significant changes to ICC rules, 
significant changes to clearing operating procedures, material 
modifications to significant capabilities provided by ICC, or 
significant changes to models.\7\ A steering committee, comprised of 
members of management, is responsible for prioritizing new initiatives 
and guiding their implementation.\8\
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    \7\ Id.
    \8\ Id.
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    The New Initiative Approval Committee (``NIAC'') identifies, 
reviews, and approves new initiatives and is a management committee 
that includes department heads, and representatives from Enterprise 
Risk, Quality Systems, and Systems Operations.\9\ The NIAC also 
determines the conditions, restrictions, and limitations of new 
initiatives.\10\ Additionally, the NIAC documents its process with an 
approval matrix, risk assessment, a form verifying that all conditions 
and restrictions have been satisfied prior to enactment of the new 
initiative, and a tracking log for the identification and review of new 
initiatives.\11\ The NIAC also reviews initiatives after implementation 
to ensure compliance with any conditions.\12\ The chair of the NIAC 
maintains the NIA Policy, ensures cooperation and coordination between 
the steering committee and NIAC, and brings material changes to the NIA 
Policy to the ICC board for review and approval.\13\
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    \9\ Id. at 67445-67446.
    \10\ Id. at 67446.
    \11\ Id.
    \12\ Id.
    \13\ Id.
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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.\14\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act,\15\ and Rules 17Ad-22(d)(4) and (d)(8) thereunder.\16\
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    \14\ 15 U.S.C. 78s(b)(2)(C).
    \15\ 15 U.S.C. 78q-1(b)(3)(F).
    \16\ 17 CFR 240.17Ad-22(d)(4) and (d)(8).
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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 a registered 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, and 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.\17\ As discussed above, the proposed rule change 
would revise the NIA Policy, which sets forth, clarifies, and 
harmonizes ICC's policies and procedures for approval of new 
initiatives that involve potentially significant changes, including 
initiatives that (1) involve new and material modifications to the risk 
or pricing methodology; (2) involve potential significant changes to 
the processing system, ICC Clearing Rules, or clearing operating 
procedures; (3) involve new and material modifications to existing and 
significant capabilities provided by ICC; or (4) involve Model Changes 
\18\ classified as Materiality A under ICC's Model Validation Framework 
\19\ (collectively, ``New Initiatives''). The Commission believes that, 
if not clearly and consistently identified, reviewed, and approved 
according to appropriate policies and procedures, such New Initiatives 
could pose operational or other risks to ICC.
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    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ Model Changes include new and enhanced risk modeling 
components of ICC's risk management system. Depending on how 
substantially the Model Change affects the system's assessment of 
risk for the related risk driver(s), it is classified as Materiality 
A (i.e., substantial impact) or Materiality B (i.e., no substantial 
impact).
    \19\ Notice, 83 FR at 67445.
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    The NIA Policy would clearly describe and formalize the roles of 
the key participants involved in identifying, reviewing, and ultimately 
approving any such potentially significant New Initiatives, and 
identify such participants' specific authority and responsibilities. It 
also would identify, clearly describe, and formalize the specific steps 
to be taken during the identification, review, and approval of New 
Initiatives. By doing so, the Commission believes that the NIA Policy 
will enhance ICC's ability to manage risks and avoid potential 
disruptions to operations related to New Initiatives, thereby enhancing 
ICC's ability to ensure the prompt and accurate clearance and 
settlement of securities transactions. This, in turn, would enhance 
ICC's ability to ensure it is in a better position to promptly clear 
and settle securities transactions and assure the safeguarding of 
securities and funds which are in the custody or control of ICC, or for 
which it is responsible. Therefore, the Commission finds that the 
proposed rule change is consistent with the requirements of 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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[[Page 4571]]

B. Consistency With Rule 17Ad-22(d)(4)

    Rule 17Ad-22(d)(4) requires, in relevant part, that a registered 
clearing agency that is not a covered clearing agency establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to identify sources of operational risk and 
minimize them through the development of appropriate systems, controls, 
and procedures.\21\ The Commission believes that the NIA Policy would 
do this through establishing revised and clarified definitions, 
personnel responsibilities, and documentation procedures related to the 
identification, review, and approval of New Initiatives.
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    \21\ 17 CFR 240.17Ad-22(d)(4).
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    Specifically, the revised NIA Policy would ensure that ICC's system 
of approving New Initiatives defines such initiatives (as noted above) 
as being those that most significantly impact key areas and functions 
of ICC, and therefore helps ensures that ICC will appropriately 
address, and therefore enhance its ability to mitigate, the potential 
operational and other risks associated with implementing such New 
Initiatives. Further, by clearly identifying and transparently 
communicating the role of ICC's management across multiple departments 
and functions, the Commission believes that the NIA Policy would 
enhance ICC's ability to identify sources of operational risk by 
involving the most relevant and responsible parties in focusing on the 
most impactful initiatives.
    Additionally, the revisions to the NIA Policy would create a system 
in which new initiatives would be assessed by relevant stakeholders 
throughout ICC and through which such assessments would be documented. 
For instance, the NIAC would utilize detailed matrixes and forms to 
evidence that requisite approvals for new initiatives were obtained, 
risks and mitigation plans were considered, and all appropriate 
conditions were met prior to the implementation of a New Initiative. 
The Commission believes that such documentation would enhance ICC's 
ability to minimize operational risk by requiring thorough reviews and 
justifications of its actions. As a result, the Commission finds that 
the proposed rule, taken as a whole, enhances ICC's process of 
identifying and minimizing sources of operational risk associated with 
New Initiatives and is consequently consistent with Rule 17Ad-
22(d)(4).\22\
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    \22\ Id.
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C. Consistency With Rule 17Ad-22(d)(8)

    Rule 17Ad-22(d)(8) \23\ requires, in relevant part, that a 
registered clearing agency that is not a covered clearing agency 
implement, maintain and enforce written policies and procedures 
reasonably designed to have governance arrangements that are clear and 
transparent to fulfill the public interest requirements in Section 17A 
of the Act.\24\ The NIA Policy proposed by ICC describes the roles of 
key participants in the identification, review, approval, and 
assessment of new initiatives. In particular, the NIA Policy describes 
the steering committee's role in prioritizing the implementation of 
initiatives as well as NIAC's role and composition, including the 
participation of the heads of departments and representatives of 
Enterprise Risk, Quality Systems, and Systems Operations. Additionally, 
the proposal clarifies that the NIA Policy contains procedures for 
notifying and seeking input from all relevant departments on the 
introduction of New Initiatives. By setting forth clearly delineated 
managerial roles and requiring information sharing across ICC related 
to New Initiatives, the Commission finds that the proposed rule change 
enhances and fosters governance arrangements that are clear and 
transparent and is therefore consistent with the requirements of Rule 
17Ad-22(d)(8).\25\
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    \23\ 17 CFR 240.17Ad-22(d)(8).
    \24\ 15 U.S.C. 78q-1.
    \25\ 17 CFR 240.17Ad-22(d)(8).
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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 of the Act \26\ 
and Rules 17Ad-22(d)(4) and 17Ad-22(d)(8) \27\ thereunder.
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    \26\ 15 U.S.C. 78q-1.
    \27\ 17 CFR 240.17Ad-22(d)(4) and (d)(8).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\28\ that the proposed rule change (SR-ICC-2018-011) be, and hereby is, 
approved.\29\
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    \28\ 15 U.S.C. 78s(b)(2).
    \29\ 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).
    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02452 Filed 2-14-19; 8:45 am]
BILLING CODE 8011-01-P


