[Federal Register Volume 87, Number 194 (Friday, October 7, 2022)]
[Notices]
[Pages 61109-61112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21823]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95964; File No. SR-ICEEU-2022-015]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Relating to the ICE Clear Europe 
Operational Risk and Resilience Policy

October 3, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 22, 2022, ICE Clear Europe Limited (``ICE Clear Europe'' 
or the ``Clearing House'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule changes described in 
Items I, II and III below, which Items have been prepared primarily by 
ICE Clear Europe. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing 
House'') proposes to rename and modify its Operational Risk Management 
Policy, which will now be known as the Operational Risk and Resilience 
Policy (the ``Operational Risk and Resilience Policy'' or ``Policy''). 
The amendments would make certain other clarifications and updates. A 
copy of the proposed amendments is set forth in Exhibit 5 [sic].\3\
---------------------------------------------------------------------------

    \3\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules and the 
Operational Risk and Resilience Policy.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. ICE Clear Europe has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    ICE Clear Europe is proposing to rename its existing Operational 
Risk Management Policy to be the Operational Risk and Resilience 
Policy, and to make certain amendments thereto to address operational 
resilience in addition to operational risk. The amendments would, as 
set forth herein, expand the description of the framework under which 
the Clearing House manages operational risk and operational resilience, 
describe the existing lines of defense maintained by the Clearing House 
against such risks and the roles and responsibilities of Clearing House 
committees, personnel and the Board in respect of the framework. The 
proposed amendments are designed to update the documentation of ICE 
Clear Europe's practices in this regard to be consistent with 
requirements of the Bank of England (``BoE'') for central 
counterparties to establish an operational resilience framework by 
March 31, 2022 that identifies and prioritises ``important business 
services,'' sets out impact tolerances in respect of such services, 
identifies and maps dependencies for such important business services 
and establishes a scenario testing program with respect to such 
recovery of such services following disruption.\4\ Other non-
substantive drafting and similar improvements would also be made to the 
Policy.
---------------------------------------------------------------------------

    \4\ The BoE requires central counterparties to establish an 
operational resilience framework which shall, among other 
requirements, identify important business services and set impact 
tolerances for such services. See Bank of England, Supervisory 
Statement: Operational Resilience--Central Counterparties'' (March 
2021), available at: Operational Resilience: Central Counterparties 
Supervisory Statement March 2021 (bankofengland.co.uk) (the 
``Supervisory Statement''). See also Bank of England Prudential 
Regulation Authority, Statement of Policy: Operational Resilience 
(March 2021), available at SoP 'Operational resilience' 
(bankofengland.co.uk).
---------------------------------------------------------------------------

    The amendments would provide that the purpose of the document is to 
set out the Operational Risk and Resilience management framework, 
including identify and managing relevant risks. (The amendments remove 
certain unnecessary references to ``operational'' risk throughout the 
Policy as the entire Policy addresses operational risk.) The Policy 
would apply to all of the Clearing House's departments and functions.
    The amendments would add a new subsection which would describe the 
Clearing House's existing three lines of defense model for managing 
risks; the first line of defense (or risk owner) (First Line) is 
responsible for managing risks to within the defined Board risk 
appetite and for ensuring adherence to the requirements of the Policy. 
The First Line would include business departments except for the Risk 
Oversight Department and Internal Audit. The Risk Oversight Department 
(ROD) and Enterprise Risk Management (ERM) is the second line of 
defense (Second Line) and is responsible for challenging the first line 
and monitoring adherence to the requirement of the Policy. The third 
line of defense (Third Line) would be the Internal Audit function and 
would provide independent and objective assurance to the Board. The 
three lines of defense model is currently used within the Clearing 
House's risk management framework, and the proposed amendments are 
intended to more formally document that model, with its existing roles 
and responsibilities, in the Policy.
    The amendments would specifically include Operational Resilience 
policies

[[Page 61110]]

as part of the architecture of the documentation which supports the 
Policy. The amendments would define ``operational resilience'' as the 
ability to prevent, respond to, recover and learn from operational 
service disruption events.
    In a new subsection describing in more detail the Clearing House's 
operational risk and resilience framework, the Clearing House would 
describe the purpose of the framework as to reduce the likelihood of an 
operational disruption event within acceptable tolerance and mitigate 
and quickly recover from operational disruption events. The framework 
would be comprised of the following set of existing complementary 
policies (certain of which are ICE Clear Europe policies and others are 
ICE group-wide policies): (i) the Policy, which is intended to ensure 
that the risk of operational failure of important processes is 
minimized, (ii) Incident Management Policy, which is intended to 
provide a cohesive framework for the communication, resolution and 
recording of incidents and to ensure that incidents are resolved in a 
planned and controlled manner in order to resolve any interruptions 
quickly and restore service, (iii) Business Continuity & Disaster 
Recovery Policy, which is intended to ensure that appropriate plans are 
in place to recover from a business continuity or disaster recover 
incident, (iv) Information Security and Cyber Security Strategy, which 
outlines the responsibilities of users and the steps they must take to 
protect ICE information and information systems, (v) Outsourcing 
Policy, which governs outsourcing arrangements to ensure that the 
Clearing House's minimum operational resilience are met by outsourced 
service providers, and (vi) Vendor Management Policy, which ensures 
that requisite due diligence is performed and ensures that vendors have 
the capacity, resiliency and capability to fully support the Clearing 
House. (Other than the Policy, the listed policies are not being 
amended hereby.)
    The amendments would also add a new subsection describing the 
Clearing House's important business services. A business service would 
be considered important if a prolonged disruption of such service would 
significantly disrupt the orderly functioning of a market which the 
Clearing House serves, thereby impacting financial stability. Important 
business services would be required to be identified and documented, 
and such identification would help prioritization of these services 
from an operational resilience viewpoint. For each important business 
service, dependencies relating to people, processes, technology, 
facilities, and underlying information would be identified. Identified 
business services would be required to be reviewed at least annually by 
the First Line, overseen by the Second Line and approved by an 
appropriate Board-level Committee. These amendments do not reflect a 
substantive change in the Clearing House's existing risk management 
approach but rather formally address relevant services already 
identified by the Clearing House as being critical in light of the 
requirement described above under the Supervisory Statement that a 
central counterparty document its framework for identifying and 
documenting ``important business services''.
    The amendments would include a new subsection which would describe 
the Clearing House's impact tolerances, which would be defined as the 
maximum tolerable level of disruption for an important business 
service, whereby further disruption would pose a significant impact to 
the market(s) serve by the Clearing House. For each important business 
service an appropriate impact tolerance would be established, 
considering the duration of any outage and additional relevant metrics, 
such as the magnitude of the impact. Additionally, the Clearing House 
would be required to ensure that appropriate controls and recovery 
procedures are in place for important business services in order to aid 
with recovery in the case of service disruption. Monitoring of impact 
tolerances would need to be in place, with any breach escalated to the 
Clearing House's Executive Risk Committee and Board. Breaches to impact 
tolerances would be reviewed by the First Line and a remediation plan 
established for any identified weakness. Such review outcome and 
remediation plan would need to be agreed with the Second Line before 
presentation to the Board. Impact tolerances must be reviewed at least 
annually by the First Line, overseen by the Second Line and approved by 
appropriate Board-level Committee. Such amendments are intended to 
implement the requirement under the Supervisory Statement that the 
Clearing House identify impact tolerances in consideration of business 
services identified as ``important business services. Although this 
requirement is new, the Clearing House's implementation builds on its 
existing risk management framework which already covers incident 
management based on levels of severity linked to financial, 
reputational, operational and regulatory impacts.
    Also further to the requirement under the Supervisory Statement, 
the amendments would add a new subsection addressing scenario analysis 
and testing to identify any operational resilience weakness. Such 
analysis or testing must be conducted on important business services to 
determine if the Clearing House can remain within the impact tolerances 
under a range of extreme but plausible disruption scenarios and must 
include scenarios which disrupt more than one important business 
service simultaneously and take into account dependencies. The First 
Line and Second Line would have to agree on any remediation line for 
weaknesses identified related to extreme but plausible scenarios. 
Scenario analysis and testing results would be reported to the ERC and 
the Board. Such amendments do not represent a substantive change from 
the Clearing House's existing risk management practices and are 
intended to document those practices in light of the Supervisory 
Statement, reflecting existing roles and responsibilities.
    The section formerly titled ``The Policy for Operational Risk 
Management'' would be renamed ``Risk and Control Assessments'' in order 
to more clearly reflect the information contained in the subsection. 
Other stylistic changes would be made in the Policy to improve clarity 
and readability. Certain non-substantive fixes would also be made, 
including providing that risk assessments (and not ``risks'') are 
documented in the Enterprise Risk Register, reflecting that the correct 
name of Appendix A to the Policy is ``Enterprise Risk Register'', and 
correcting internal section references.
    In respect of risk monitoring, the amendments would provide that 
the ERM would coordinate with the First and Third Lines to develop 
control monitoring plans for Key Controls. This change is to reflect 
the Clearing House's current practice.
    In line with other Clearing House policies, the amendments would 
provide that the Policy is subject to at least annual review (rather 
than biennial review) or earlier in the event of a material change.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Operational Risk and Resilience Policy are consistent with the 
requirements of Section 17A of the Act \5\ and the regulations 
thereunder applicable to it.

[[Page 61111]]

In particular, Section 17A(b)(3)(F) of the Act \6\ requires, among 
other things, that the rules of a 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, the safeguarding of securities and funds 
in the custody or control of the clearing agency or for which it is 
responsible, and the protection of investors and the public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The proposed changes to the Policy are designed to strengthen ICE 
Clear Europe's tools to manage the risk of losses resulting from 
operational errors or failures. The amendments would formally extend 
the Policy to cover operational resilience as well as operational risk. 
The amendments would more clearly tie together existing policies and 
procedures relevant to operational risk and resilience, as required by 
the Supervisory Statement as described herein. The amendments would 
also address important business services, and the procedures to be used 
by the Clearing House to identify such services and address related 
risks and dependencies and implement adequate controls. The Policy 
would also address impact tolerances and scenario analyses and testing. 
Taken together, the Policy is designed to augment the Clearing House's 
ability to manage operational risk and enhance its operational 
resilience. The proposed amendments would thus promote the stability of 
the Clearing House and the prompt and accurate clearance and settlement 
of cleared contracts and the safeguarding of securities and funds in 
ICE Clear Europe's custody or control or for which it is responsible. 
The enhanced risk management is therefore also generally consistent 
with the protection of investors and the public interest in the safe 
operation of the Clearing House. Accordingly, the amendments satisfy 
the requirements of Section 17A(b)(3)(F).\7\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The amendments to the Policy are also consistent with relevant 
provisions of Rule 17Ad-22.\8\ Rule 17Ad-22(e)(3) provides that 
``[e]ach covered clearing agency shall establish, implement, maintain 
and enforce written policies and procedures reasonable designed to, as 
applicable [. . .] maintain a sound risk management framework for 
comprehensively managing . . . operational . . . and other risks that 
arise in or are borne by the covered clearing agency.'' \9\ As set 
forth above, the amendments are intended to clarify and enhance the 
Clearing House's risk management framework as it relates to operational 
risks, including through the extension of the Policy to formally 
address resilience. The amendments would thus strengthen the management 
of operational risks and risk management more generally. In ICE Clear 
Europe's view, the amendments are therefore consistent with the 
requirements of Rule 17Ad-22(e)(3).\10\
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17 Ad-22.
    \9\ 17 CFR 240.17 Ad-22(e)(3).
    \10\ 17 CFR 240.17 Ad-22(e)(3).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(2) provides that ``[e]ach covered clearing agency 
shall establish, implement, maintain and enforce written policies and 
procedures reasonable designed to, as applicable [. . .] provide for 
governance arrangements that are clear and transparent'' \11\ and 
``[s]pecify clear and direct lines of responsibility'' \12\. The 
amendments to the Policy would clarify and describe the 
responsibilities of the Clearing House's lines of defense and 
committees, management and the Board in relation the Clearing House's 
resilience framework and the Policy. In ICE Clear Europe's view, the 
amendments are therefore consistent with the requirements of Rule 17Ad-
22(e)(2).\13\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.17 Ad-22(e)(2)(i).
    \12\ 17 CFR 240.17 Ad-22(e)(2)(v).
    \13\ 17 CFR 240.17 Ad-22(e)(2).
---------------------------------------------------------------------------

    The proposed amendments are also consistent with Rule 17Ad-
22(e)(17)(i), which provides that ``[e]ach covered clearing agency 
shall establish, implement, maintain and enforce written policies and 
procedures reasonable designed to, as applicable [. . .] manage the 
clearing agency'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.'' \14\ The amendments to the Policy 
facilitate ongoing identification of operational risks, enhancement of 
resilience in the face of such risks and mitigation of the impact of 
such risks through improved procedures and controls. As noted above, 
these enhancements include the expansion of the Policy to address 
resilience, the identification of important business services, the 
establishment of impact tolerances and scenario analysis, together with 
related controls. In ICE Clear Europe's view, the amendments are 
therefore consistent with the requirements of Rule 17Ad-
22(e)(17)(i).\15\
---------------------------------------------------------------------------

    \14\ 17 CFR 240.17 Ad-22(e)(17)(i).
    \15\ 17 CFR 240.17 Ad-22(e)(17)(i).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The amendments 
are being adopted to update and enhance the Clearing House's 
Operational Risk and Resilience Policy which relates to the Clearing 
House's internal processes for operational risk management. The 
amendments would not change the Rules or Procedures, or the rights or 
obligations of Clearing Members or the Clearing House. ICE Clear Europe 
does not believe the amendments and adoption would affect the costs of 
clearing, the ability of market participants to access clearing, or the 
market for clearing services generally. Therefore, ICE Clear Europe 
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 amendments have not been 
solicited or received by ICE Clear Europe. ICE Clear Europe will notify 
the Commission of any written comments received with respect to the 
proposed rule change.

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.

[[Page 61112]]

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 [email protected]. Please include 
File Number SR-ICEEU-2022-015 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-ICEEU-2022-015. 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 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 Europe and on ICE 
Clear Europe's website at https://www.theice.com/clear-europe/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-ICEEU-2022-015 and should be 
submitted on or before October 28, 2022.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-21823 Filed 10-6-22; 8:45 am]
BILLING CODE 8011-01-P


