[Federal Register Volume 86, Number 55 (Wednesday, March 24, 2021)]
[Notices]
[Pages 15747-15750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91361; File No. SR-ICC-2021-004]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Governance Playbook

March 18, 2021.

I. Introduction

    On January 29, 2021, 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 (the ``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to update and 
formalize the ICC Governance Playbook. The proposed rule change was 
published for comment in the Federal Register on February 16, 2021.\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 Governance 
Playbook; Exchange Act Release No. 91090 (Feb. 9, 2021); 86 FR 9557 
(Feb. 16, 2021) (``Notice'').
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II. Description of the Proposed Rule Change

    The principal purpose of the proposed rule change is to update and 
formalize the ICC Governance Playbook.\4\ Specifically, the proposed 
rule change would consolidate and summarize governance arrangements set 
forth in the ICC Clearing Rules

[[Page 15748]]

(``Rules''), operating agreement, and other ICC policies and procedures 
within the Governance Playbook document. The Governance Playbook 
contains information regarding the governance structure at ICC, which 
includes the Board, committees, and management. The document is divided 
in six parts and sets out (i) the purpose of the document, (ii) an 
introduction to the ICC governance structure, (iii) information on the 
ICC Board of Managers (the ``Board,'' with each member a ``Manager''), 
(iv) descriptions of the committees at ICC, (v) descriptions of the 
special purpose committees at ICC, and (vi) a revision history of the 
Governance Playbook and an appendix that outlines the roles, 
responsibilities, and required skills of key senior management 
positions and provides an email template relating to the annual 
reconstitution of ICC's Risk Committee.
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    \4\ The description that follows is substantially excerpted from 
the Notice, 86 FR at 9557.
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1. Purpose

    ICC proposes to formalize and update the purpose section of the 
Governance Playbook. Specifically, the purpose section includes a 
statement that the governance guidelines set forth in the Governance 
Playbook are intended to comply with applicable Commission and 
Commodity Futures Trading Commission (``CFTC'') regulations. This 
statement would include an updated citation to a relevant CFTC 
Regulation.

2. Introduction to ICC Governance Structure

    In the introduction section of the Governance Playbook, ICC 
proposes to formalize its general mission and describe its overall 
governance structure, comprised of its Board, committees and 
management. The introduction section reflects the Board-determined 
mission statement that ICC is to provide safe and sound central 
counterparty services to reduce systemic risk in an efficient and 
compliant manner while generating positive returns for shareholders. 
The introduction section also states that ICC's governance arrangements 
are clear and transparent, promote its safety and efficiency and 
support the stability of the broader financial system, other relevant 
public interest considerations and the objectives of relevant 
stakeholders.

3. Board of Managers

    In this section of the Governance Playbook, ICC proposes to 
formalize the Board's sole responsibility for the control and 
management of ICC's operations, subject only to prior consultation 
rights of the ICC Risk Committee and the ICC Risk Management 
Subcommittee as described in Chapter 5 of its Rules. This section would 
clarify that ICC's officers, including the Chief Operating Officer, 
Chief Compliance Officer, Chief Risk Officer and General Counsel, are 
designated by the Board following a determination that they possess the 
requisite experience and skills to discharge their responsibilities and 
report to the ICC President. The section also formalizes additional 
reporting lines of certain ICC officers to ensure that relevant 
personnel have sufficient access to the Board, consistent with relevant 
regulation. Specifically, the Chief Compliance Officer has an 
additional reporting line directly to the Board, and the Chief Risk 
Officer has an additional reporting line directly to the Chairperson of 
the Risk Committee, who also is a Manager on the Board. This section of 
the Governance Playbook details how the Board guides management with 
respect to strategic planning and priority setting.
    Additionally, this section of the Governance Playbook describes the 
composition of the Board, and specifies the fitness standards required 
of each Manager, as well as the fitness standards and qualifications of 
the Board as a whole. ICC represents that it includes such procedures 
in the Governance Playbook to ensure that the Board consists of 
suitable individuals having appropriate skills and incentives and that 
Managers have the appropriate experience, skills, and integrity 
necessary to discharge their Board responsibilities.\5\ The Governance 
Playbook describes the election procedures for new Managers and 
specifies who is responsible for electing new Managers and for ensuring 
such Managers meet the fitness standards. The Governance Playbook also 
contains information regarding scheduling of meetings and meeting 
frequency, and lists all documents relevant to Board operations. The 
Governance Playbook sets forth the process for determining the 
independence of those Managers who are required to be independent. 
Additionally, the document lists the independence qualifications 
considered as part of such independence determinations and describes 
the annual questionnaire process each independent Manager is required 
to complete. The Governance Playbook also describes the self-evaluation 
survey process by which ICC reviews the performance of the Board and 
its individual Managers on an annual basis in accordance with 
applicable regulation.
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    \5\ See Notice, 86 FR at 9557.
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    The Governance Playbook also contains information on required 
disclosures of the Board's major decisions under relevant regulations. 
The Governance Playbook formalizes arrangements by which all major 
decisions of the Board are clearly disclosed to clearing members, other 
relevant stakeholders, and ICC's regulators. In addition, the 
Governance Playbook provides governance procedures for clearly 
disclosing to the public the Board's major decisions that have a broad 
market impact. With respect to information made available to the 
public, ICC posts on its website relevant rules and material procedures 
and documents. ICC maintains a comprehensive public Disclosure 
Framework that describes its material rules, policies, and procedures 
regarding its legal, governance, risk management, and operating 
framework. ICC updates the Disclosure Framework every two years or more 
frequently following material changes to ICC's systems or environment 
in which it operates.
    Further, the Governance Playbook describes the Board's role in 
reviewing the performance and compensation of senior managers who are 
responsible for executing the Board's decisions throughout the year. As 
part of this process, the Board will consider, in accordance with 
relevant regulation, whether senior management continues to have the 
appropriate experience, skills, and integrity necessary to discharge 
their responsibilities.

4. Committees

    In this section of the Governance Playbook, ICC would formalize 
information regarding the roles and responsibilities of the various 
committees at ICC, including the Audit Committee, Risk Committee, Risk 
Management Subcommittee, Advisory Committee, Futures Commission 
Merchant (FCM) Executive Council, Participant Review Committee, Credit 
Review Subcommittee, New Initiatives Approval Committee, Operations 
Working Group, Trading Advisory Group, Business Continuity Planning 
(BCP) and Disaster Recovery (DR) Oversight Committee of the Compliance 
Committee, Risk Working Group, Compliance Committee, and Steering 
Committee. The Governance Playbook further details and updates the 
membership composition and meeting frequency for each committee and 
contains a listing of all relevant committee documents (including, as 
applicable, a charter, meeting minutes,

[[Page 15749]]

and agendas). As applicable, the Governance Playbook details procedures 
for electing new members to a committee. The Governance Playbook also 
includes procedures for the annual Audit Committee performance review 
and the annual reconstitution of the Risk Committee.

5. Special Purpose Committees

    This section of the Governance Playbook would formalize information 
regarding ICC's special purpose committees, including the Business 
Conduct Committee, Regional CDS Committees, and the CDS Default 
Committee. The Governance Playbook contains a brief description of each 
special purpose committee, details membership composition and meeting 
frequency, and lists relevant committee documents. As applicable, the 
Governance Playbook contains information regarding the appointment of 
new members.

6. Revision History and Appendix

    Finally, the Governance Playbook includes a revision history to 
document the date, versions, and revisions to the Governance Playbook 
document. An appendix follows the revision history with relevant 
detailed information, including a record of the roles, 
responsibilities, and required skills of key senior management in 
Appendix 1, and an email template relating to the annual reconstitution 
of the ICC Risk Committee composition in Appendix 2.

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.\6\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \7\ and Rules 17Ad-22(e)(2) and (e)(23)(i), (iv), and (v) 
thereunder.\8\
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    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 240.17Ad-22(e)(2) and (e)(23)(i), (iv), and (v).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, in part, that the rules 
of a clearing agency, such as 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, to assure the safeguarding of securities and funds which 
are in the custody or control of ICC or for which it is responsible, 
and to protect the public interest.\9\
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    As noted above, the principal purpose of the proposed rule change 
is to formalize and update the Governance Playbook as a single 
reference document of governance guidelines that consolidates and 
summarizes the ICC governance arrangements set forth in the Rules, 
operating agreement, and a number of written ICC policies and 
procedures. The introduction section of the Governance Playbook states 
its intended purposes to ensure that ICC's governance arrangements are 
clear and transparent, promote ICC's safety and efficiency and support 
the stability of the broader financial system, other relevant public 
interest considerations and the objectives of relevant stakeholders.
    The Governance Playbook also reflects the Board's sole 
responsibility for the control and management of ICC's operations, 
subject only to prior consultation rights of the ICC Risk Committee and 
the ICC Risk Management Subcommittee as described in Chapter 5 of ICC's 
Rules. The Governance Playbook describes the composition of the Board 
and the election procedures for new Managers, provides information 
regarding scheduling of meetings and meeting frequency, and updates 
required disclosures under relevant regulations of the Board's major 
decisions. The Governance Playbook describes the role of the Board in 
reviewing the performance and compensation of senior managers 
responsible for executing the Board's decisions, information regarding 
the roles and responsibilities of the various committees at ICC, 
information regarding ICC's special purpose committees, and a revision 
history and an appendix with relevant information that outlines the 
roles, responsibilities, and required skills of key senior management 
positions and provides an email template relating to the annual 
reconstitution of ICC's Risk Committee.
    Governance arrangements are critical to the sound operation of 
clearing agencies.\10\ Specifically, clear and transparent governance 
documents promote accountability and reliability in the decisions, 
rules, and procedures of a clearing agency.\11\ Clear and transparent 
governance documents also provide interested parties, including owners, 
members, and general members of the public, with information about how 
a clearing agency's decisions are made and what the rules and 
procedures are designed to accomplish.\12\ Further, the decisions, 
rules, and procedures of a clearing agency are important, as they can 
have widespread impact, affecting multiple market members, financial 
institutions, markets, and jurisdictions.\13\
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    \10\ Securities Exchange Act Release No. 71699 (May 21, 2014), 
79 FR 29508, 29521 (May 22, 2014) (``Covered Clearing Agency 
Standards Proposing Release'').
    \11\ Securities Exchange Act Release No. 64017 (March 3, 2011), 
76 FR 14472 (March 16, 2011) at 14488.
    \12\ Id.
    \13\ Covered Clearing Agency Standards Proposing Release, 79 FR 
at 29521.
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    The Commission believes that the proposed rule change would provide 
ICC stakeholders with a better understanding of how ICC makes decisions 
that could ultimately affect them and, potentially, the broader 
financial system. The proposed rule change would also help the Board, 
as well as ICC's management, employees, and members, understand the 
roles and responsibilities of ICC officers, committees and 
subcommittees. The Commission further believes that the Governance 
Playbook should enhance the clarity and transparency of ICC's 
governance structure and facilitate the efficiency and effectiveness of 
ICC's governance procedures by providing a single, consolidated summary 
document of governance guidelines for ease of reference. For these 
reasons, the proposed rule change should facilitate ICC's ability to 
provide clearing services that are supported by, and consistent with, 
clear and transparent governance arrangements that comply with relevant 
regulations and internal policies and procedures, thereby helping ICC 
maintain prudent risk management processes to promote the prompt and 
accurate clearance of settlement and securities transactions and 
derivative agreements, contracts and transactions cleared by ICC, to 
assure the safeguarding of securities and funds in the custody or 
control of ICC, and to protect the public interest.\14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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    For these reasons, the Commission finds 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 Rule 17Ad-22(e)(2) Under the Act

    Rule 17Ad-22(e)(2) under the Act requires each covered clearing 
agency to establish, implement, maintain and

[[Page 15750]]

enforce written policies and procedures reasonably designed to provide 
for governance arrangements that, among other things, are clear and 
transparent, establish that the board of directors and senior 
management have appropriate experience and skills to discharge their 
duties and responsibilities, and specify clear and direct lines of 
responsibility.\16\ As stated above, the proposed rule change would 
update and formalize the Governance Playbook to reflect the governance 
arrangements in place at ICC, including those that specify: the Board's 
responsibility for the control and management of ICC's operations, the 
composition of the Board, the election procedures for new Managers, the 
fitness standards and qualifications required of each Manager and the 
Board as a whole, and the process to review the performance of ICC's 
senior managers. The Commission believes that these aspects of the 
proposed rule change should help ICC ensure that the Board and 
individual Managers, as well as ICC's senior managers, including the 
Chief Operating Officer, Chief Compliance Officer, Chief Risk Officer 
and General Counsel, have the appropriate experience and skills to 
discharge their duties and responsibilities. Further, the Commission 
believes the Governance Playbook specifies clear and direct lines of 
responsibility by identifying reporting lines of certain ICC officers 
to ensure they have sufficient access to the Board, consistent with 
relevant regulation. For these reasons, the Commission believes that 
the proposed rule change is consistent with Rule 17Ad-22(e)(2) \17\ 
under the Act.
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    \16\ 17 CFR 240.17Ad-22(e)(2).
    \17\ 17 CFR 240.17Ad-22(e)(2).
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C. Consistency With Rule 17Ad-22(e)(23)(i), (iv), and (v) Under the Act

    Rule 17Ad-22(e)(23)(i), (iv), and (v) under the Act requires each 
covered clearing agency to establish, implement, maintain and enforce 
written policies and procedures reasonably designed to provide for, 
among other things, (1) publicly disclosing all relevant rules and 
material procedures, including key aspects of its default rules and 
procedures, (2) a comprehensive public disclosure that describes its 
material rules, policies, and procedures regarding its legal, 
governance, risk management, and operating framework, accurate in all 
material respects at the time of publication, and (3) updating the 
public disclosure every two years, or more frequently following changes 
to its system or the environment in which it operates to the extent 
necessary to ensure statements previously provided remain accurate in 
all material respects.\18\ As noted above, the Governance Playbook 
reflects updated arrangements by which all major decisions of the Board 
are clearly disclosed to clearing members, other relevant stakeholders, 
and ICC's regulators. In addition, the Governance Playbook provides 
governance procedures for clearly disclosing to the public the Board's 
major decisions that have a broad market impact. With respect to 
information made available to the public, the Governance Playbook 
specifies that ICC posts on its website all relevant rules and material 
procedures and documents, as required by applicable regulations. The 
Commission believes that these aspects of the Governance Playbook 
should help ensure that ICC publicly discloses all relevant rules and 
material procedures, including key aspects of its default rules and 
procedures.
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    \18\ 17 CFR 240.17Ad-22(e)(23)(i), (iv), and (v).
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    In addition, the Governance Playbook specifies that ICC maintains a 
comprehensive public Disclosure Framework that describes its material 
rules, policies, and procedures regarding its legal, governance, risk 
management, and operating framework. The Governance Playbook formalizes 
the process by which ICC Legal will update the public Disclosure 
Framework every two years or more frequently following material changes 
to ICC's systems or environment in which it operates, including updates 
for major decisions of the Board with a broad market impact. The 
Commission believes that these aspects of the Governance Playbook 
should help ensure ICC's compliance with its regulatory obligation to 
provide a comprehensive public disclosure that is updated every two 
years or more frequently following material changes.
    For these reasons, the Commission believes that the proposed rule 
change is consistent with Rule 17Ad-22(e)(23)(i), (iv), and (v) \19\ 
under the Act.
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    \19\ 17 CFR 240.17Ad-22(e)(23)(i), (iv) and (v).
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D. 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) and (e)(23)(i), (iv), and (v) 
thereunder.\21\
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    \20\ 15 U.S.C. 78q-1(b)(3)(F).
    \21\ 17 CFR 240.17Ad-22(e)(2) and (e)(23)(i), (iv), and (v).
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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-2021-004), 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).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\

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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-06002 Filed 3-23-21; 8:45 am]
BILLING CODE 8011-01-P


