[Federal Register Volume 84, Number 125 (Friday, June 28, 2019)]
[Notices]
[Pages 31132-31133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86184; File No. SR-ICEEU-2019-009]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Relating to the ICE Clear Europe 
Operational Risk Management Policy

June 24, 2019.

I. Introduction

    On May 1, 2019, ICE Clear Europe Limited (``ICE Clear Europe'') 
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 (SR-
ICEEU-2019-009) to formalize its Operational Risk Management Policy 
(``ORMP'' or ``Policy''), which consolidates, clarifies, and codifies 
ICE Clear Europe's current policies and practices with respect to 
management of operational risk. The proposed rule change was published 
for comment in the Federal Register on May 10th, 2019.\3\ The 
Commission did not receive comments on 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\ Securities Exchange Act Release No. 34-85782 (May 6, 2019), 
84 FR 20671 (May 10, 2019) (SR-ICEEU-2019-009) (``Notice'').
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II. Description of the Proposed Rule Change

    ICE Clear Europe is proposing to formalize its ORMP by 
consolidating its practices and procedures with respect to management 
of operational risk. The ORMP defines operational risk as the risk of 
an event occurring which negatively impacts the achievement of business 
objectives resulting from inadequate or failed internal operational 
controls, people, systems or external events.\4\ The Policy notes 
several non-exhaustive examples of operational risk such as those from 
internal and external fraud, employment practices and workplace safety, 
clients, products and business practices, damage to physical assets and 
business disruption and system failures.\5\
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    \4\ Notice, 84 FR 20671.
    \5\ Id.
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    The proposed ORMP would formalize ICE Clear Europe's existing 
process for managing operational risks by clarifying and codifying a 
policy governing the overall process for managing operational risks, 
the stakeholders responsible for executing those processes, the 
frequency of review of the Policy, and the governance and reporting 
lines for the Policy.\6\ As clarified in the ORMP, risk identification 
and assessment is performed by the business areas exposed to the risk 
(referred to as ``risk owners'') at least once each year and is 
overseen by the Risk Oversight Department.\7\ More frequent ad hoc 
assessments may be necessary if risks emerge or disappear between 
annual reviews.\8\ Risk owners are also responsible for proposing and 
implementing remedial actions, which are approved by the ICE Clear 
Europe Executive Risk Committee.\9\
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    \6\ Id.
    \7\ Id.
    \8\ Id.
    \9\ Id.
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    Under the ORMP, risk owners monitor the identified operational risk 
daily through the use of key performance and risk indicators.\10\ The 
Risk Oversight Department itself monitors risks daily through risk 
appetite metrics and management thresholds as well as operational 
incidents raised by the risk owners.\11\
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    \10\ Id.
    \11\ Id.
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    As formalized in the ORMP, overall oversight of the Policy rests 
with the Audit Committee and Risk Oversight Department.\12\ Control 
assessments and operational incidents must also be regularly reported 
to senior management, the Audit Committee, the Board Risk Committee, 
and the Board.\13\ The ORMP itself is subject to review on a biennial 
basis or in the event of a material change.\14\
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    \12\ Id.
    \13\ Notice, at 84 FR 20671-20672.
    \14\ Notice, at 84 FR 20672.
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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.\15\ For the reasons given below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act,\16\ and Rule 17Ad-22(e)(17)(i) thereunder.\17\
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    \15\ 15 U.S.C. 78s(b)(2)(C).
    \16\ 15 U.S.C. 78q-1(b)(3)(F).
    \17\ 17 CFR 240.17Ad-22(e)(17)(i).
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A. Consistency With Section 17A(b)(3)(F)

    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.\18\
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed above, the proposed rule change would formalize ICE 
Clear Europe's existing policies and process for managing operational 
risks by clarifying, consolidating, and codifying a policy governing 
the overall process for managing operational risks, consolidating the 
existing procedures for operational risk management into a single 
Policy, and describing the overall process for identifying, monitoring, 
assessing, responding to, and reporting operational risk through the 
management chain. By formalizing, consolidating, and clarifying ICE 
Clear Europe's existing operational risk management procedures in this 
way, the Commission believes that ICE Clear Europe will help enhance 
and more clearly define the specific risk management duties, assessment 
metrics, and governance oversight that support ICE Clear Europe's 
ability to identify and respond to operational risks presented by its 
clearing activities. This in turn, will enhance ICE Clear Europe's 
ability to avoid disruption to clearing operations and address 
operational risks in a timely fashion, thereby promoting sound 
operations that facilitate prompt and accurate clearance and settlement 
as well as the safeguarding of securities and funds which are in the 
custody or control of ICE Clear Europe or for which it is responsible. 
Therefore, the Commission finds that the proposed rule change is 
consistent with the

[[Page 31133]]

requirements of Section 17A(b)(3)(F) of the Act.\19\
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(17)(i)

    Rule 17Ad-22(e)(17)(i) requires, in relevant part, that ICE Clear 
Europe establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable, manage ICE Clear 
Europe's operational risks by identifying the plausible sources of 
operational risk, both internal and external, and mitigating their 
impact through the use of appropriate systems, policies, procedures, 
and controls.\20\
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    \20\ 17 CFR 240.17Ad-22(e)(17)(i).
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    As described above, by formalizing, consolidating, and clarifying 
ICE Clear Europe's existing policies and process for managing 
operational risks, the ORMP is designed to enhance ICE Clear Europe's 
ability to identify relevant sources of operational risk, monitor them 
on an ongoing basis, and take appropriate and timely action to respond 
to such risks. Specifically, as described above, the proposed Policy 
provides that the business areas and functions within ICE Clear Europe 
that are exposed to particular operational risks will be the ``risk 
owners'' responsible for identifying, monitoring, assessing, and 
proposing approaches to the remediation of those risks. Further, as 
described above, these risk owners will be required as part of ongoing 
reporting as well as routine periodic reporting to inform multiple 
levels of management, up to and including the Board, of incidents, risk 
assessments, and plans to remediate operational risks. The Commission 
believes that these procedures will help ensure that the risk owners 
who are immediately impacted and who have the requisite expertise will 
regularly monitor, identify, and assess risks while also keeping 
ICEEU's management informed of such risks and incidents. As a result, 
the Commission believes that this is consistent with the obligation 
under Rule 17Ad-22(e)(17)(i) to identify the plausible sources of 
operational risk, both internal and external, and to mitigate their 
impact through the use of appropriate systems, policies, procedures, 
and controls.\21\
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    \21\ 17 CFR 240.17Ad-22(e)(17)(i).
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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 Section 17A 
of the Act,\22\ and Rule 17Ad-(e)(17)(i) \23\ thereunder.
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    \22\ 15 U.S.C. 78q-1.
    \23\ 17 CFR 240.17Ad-22(e)(17)(i).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\24\ that the proposed rule (SR-ICEEU-2019-009) change be, and hereby 
is, approved.\25\
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    \24\ 15 U.S.C. 78s(b)(2).
    \25\ 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).
    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2019-13764 Filed 6-27-19; 8:45 am]
 BILLING CODE 8011-01-P


