[Federal Register Volume 86, Number 70 (Wednesday, April 14, 2021)]
[Notices]
[Pages 19667-19670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07600]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91517; File No. SR-ICC-2021-009]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Proposed Rule Change Relating to the ICC Risk Parameter Setting and 
Review Policy

April 8, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 19668]]

Act'') \1\ and Rule 19b-4 thereunder,\2\, notice is hereby given that 
on April 2, 2021, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange 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

    The principal purpose of the proposed rule change is to make 
changes to ICC's Risk Parameter Setting and Review Policy. These 
revisions do not require any changes to the ICC Clearing Rules (the 
``Rules'').

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 revising its Risk Parameter Setting and Review Policy, 
which describes the process of setting and reviewing the risk 
management model core parameters and the performance of sensitivity 
analyses related to certain parameter settings. ICC believes that 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 revisions are described in detail as 
follows.
    ICC proposes to amend the ``Univariate Level Parameters'' 
subsection (Subsection 1.7.1). ICC proposes changes related to the 
univariate level parameters associated with the integrated spread 
response model component. Namely, ICC proposes to transition the risk 
management mean absolute deviation (``MAD'') monthly parameter update 
for index risk factors to an automatic daily update in the risk 
management system. The proposed changes would also specify that single 
name risk factor level risk management MADs are not subject to 
automatic updates and that the ICC Risk Department estimates and 
reviews the univariate single name integrated spread response 
parameters and their assumptions at least on a monthly basis.
    ICC proposes minor clarifications to the ``Implied Distribution 
Parameters for Index Option Instruments'' subsection (Subsection 
1.7.4). ICC previously replaced naming conventions for stress scenarios 
associated with the Lehman Brothers (``LB'') default with more generic 
naming conventions associated with extreme price changes, namely 
extreme price decreases and increases (the ``Extreme Price Change 
Scenarios'').\3\ Relatedly, ICC proposes minor updates to replace 
references and notations to the scenarios associated with the LB 
default with the Extreme Price Change Scenarios. ICC also proposes to 
more clearly refer to ``stress MAD factors'' as ``stress implied MAD 
factors.''
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    \3\ See SR-ICC-2020-009 for more information on the 
incorporation of the Extreme Price Change Scenarios into ICC's risk 
management policies and procedures, including the Risk Parameter 
Setting and Review Policy.
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    ICC proposes amendments to the ``Routinely Updated Parameters'' 
subsection (Subsection 2.4). As described above, ICC proposes changes 
specifying that the index risk factor level risk management MADs are 
automatically updated daily in the risk management system and the other 
risk factor parameters are reviewed at least monthly.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\5\ In particular, Section 17A(b)(3)(F) of the Act \6\ 
requires that the rule change be consistent with the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICC, the 
safeguarding of securities and funds in the custody or control of ICC 
or for which it is responsible, and the protection of investors and the 
public interest. The proposed amendments transition the risk management 
MAD monthly parameter update for index risk factors to an automatic 
daily update. Such changes would timely capture any significant MAD 
changes and minimize the cumulative effect of MAD changes between 
parameter updates, and thus reduce the level of initial margin 
procyclicality. The proposed clarifications would further ensure 
readability and clarity with respect to ICC's process of setting and 
reviewing the model core parameters to ensure that the documentation 
remains up-to-date, clear, and transparent to support the effectiveness 
of ICC's risk management system. The proposed rule change is therefore 
consistent with the prompt and accurate clearing and settlement of the 
contracts cleared by ICC, the safeguarding of securities and funds in 
the custody or control of ICC or for which it is responsible, and the 
protection of investors and the public interest, within the meaning of 
Section 17A(b)(3)(F) of the Act.\7\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ Id.
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    Rule 17Ad-22(e)(2)(i) and (v) \8\ 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. ICC's Risk Parameter Setting and Review 
Policy clearly assigns and documents responsibility and accountability 
for the estimation and review of the model core parameters and the 
performance of sensitivity analyses. Regarding the univariate level 
parameters, the proposed changes continue to ensure that ICC maintains 
clear and transparent governance procedures and arrangements, including 
by describing the frequency of the parameter reviews and updates, the 
group involved in the review process, and prerequisites to implementing 
parameter updates. As such, in ICC's view, the proposed rule change 
continues to ensure that ICC maintains policies and procedures that are 
reasonably designed to provide for clear and transparent governance 
arrangements and specify clear and direct lines of responsibility, 
consistent with Rule 17Ad-22(e)(2)(i) and (v).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \9\ Id.
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    Rule 17Ad-22(e)(4)(ii) \10\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively

[[Page 19669]]

identify, measure, monitor, and manage its credit exposures to 
participants and those arising from its payment, clearing, and 
settlement processes, including by maintaining additional financial 
resources at the minimum to enable it to cover a wide range of 
foreseeable stress scenarios that include, but are not limited to, the 
default of the two participant families that would potentially cause 
the largest aggregate credit exposure for the covered clearing agency 
in extreme but plausible market conditions. The proposed changes 
promote the soundness of the model including by transitioning the risk 
management MAD monthly parameter update for index risk factors to an 
automatic daily update. Such changes would timely capture any 
significant MAD changes and minimize the cumulative effect of MAD 
changes between parameter updates, and thus reduce the level of initial 
margin procyclicality. ICC believes that the proposed rule change would 
thus enhance ICC's ability to manage risks and maintain appropriate 
financial resources. ICC proposes additional clarifications, including 
updating references to the Extreme Price Change Scenarios and 
specifying the frequency of the subject parameter reviews and updates. 
ICC believes that such changes enhance the readability and transparency 
of the Risk Parameter Setting and Review Policy, which would strengthen 
the documentation and ensure that it remains up-to-date, clear, and 
transparent. As such, the proposed amendments would strengthen ICC's 
ability to maintain its financial resources and withstand the pressures 
of defaults, consistent with the requirements of Rule 17Ad-
22(e)(4)(ii).\11\
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    \10\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \11\ Id.
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    Rule 17Ad-22(e)(4)(vi)(B) \12\ requires each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by testing the sufficiency of its total financial resources available 
to meet the minimum financial resource requirements, including by 
conducting a comprehensive analysis on at least a monthly basis of 
underlying parameters and assumptions. Under the proposed changes, the 
Risk Parameter Setting and Review Policy continues to provide a clear 
framework for ICC to set and review the model core parameters and 
perform sensitivity analyses related to certain parameter settings on 
at least a monthly basis. The proposed changes transition the risk 
management MAD monthly parameter update for index risk factors to a 
more frequent and automatic daily update. As such, ICC believes the 
proposed rule change is consistent with the requirements of Rule 17Ad-
22(e)(4)(vi)(B).\13\
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    \12\ 17 CFR 240.17Ad-22(e)(4)(vi)(B).
    \13\ Id.
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    Rule 17Ad-22(e)(6)(i) \14\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, considers, and produces margin levels commensurate with, the 
risks and particular attributes of each relevant product, portfolio, 
and market. As described above, the index risk factor level risk 
management MADs would be automatically updated daily in the risk 
management system, which would timely capture any significant MAD 
changes and minimize the cumulative effect of MAD changes between 
parameter updates, and thus reduce the level of initial margin 
procyclicality. The additional clarifications would further promote 
clarity and transparency in the documentation. In ICC's view, the 
proposed changes thus enhance and strengthen ICC's process for 
reviewing and setting the model core parameters, which in turn serves 
to promote the soundness of ICC's risk management model and system, 
which will continue to consider and produce margin levels commensurate 
with the risks and particular attributes of each relevant product, 
portfolio, and market, consistent with the requirements of Rule 17Ad-
22(e)(6)(i).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(6)(i).
    \15\ 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 changes to 
ICC's Risk Parameter Setting and Review Policy 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 rule-comments@sec.gov. Please include 
File Number SR-ICC-2021-009 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICC-2021-009. 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 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 19670]]

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.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2021-009 and should be 
submitted on or before May 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07600 Filed 4-13-21; 8:45 am]
BILLING CODE 8011-01-P


