
[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68698-68700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21944]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98603; File No. SR-ICC-2023-011]


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

September 28, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on September 
27, 2023, 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 primarily prepared by ICC. ICC 
filed the proposed rule change pursuant to Section 19(b)(3)(A) \3\ of 
the Act and Rule 19b-4(f)(1) thereunder,\4\ such that the proposed rule 
change was immediately effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, security-based swap submission, or advance notice 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICC proposes a rule change to update the ICC Risk Parameter Setting 
and Review Policy Framework (``RPSRP''). 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 to revise its RPSRP, which describes the process of 
setting and reviewing the risk management model core parameters and the 
performance of sensitivity analysis related to certain parameter 
settings. The parameters set and calibrated pursuant to the RPSRP are 
used in ICC's risk methodology in certain calculations including, 
without limitation, initial margin and guaranty fund requirements, as 
described in the ICC Risk Management Model Description document and the 
ICC Risk Management Framework. 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 revise the RPSRP to add clarifying language and 
more detail as to how a particular parameter is calculated in response 
to a recent independent validator recommendation. Such proposed 
revisions do not represent a change in the calculation of any parameter 
set under the RPSRP. Specifically, ICC proposes to revise RPSRP Section 
1.7.1. ``Univariate Level Parameters,'' which contains a description of 
ICC's process of setting and reviewing the Univariate Level Parameters, 
which are the standardized distributions that describe the random 
fluctuations of the credit spread log-returns which are calibrated 
daily. The Univariate Level Parameters are a category of the 
``Integrated Spread Response Parameters'' model component.\5\ ICC 
proposes to provide more details to the Univariate Level Parameters 
with respect to the estimation of the stress period mean absolute 
deviation (``MAD''). The proposed revision consists of providing 
details on the determination of the stress period MAD, which is the 
period that corresponds to the peak sample MAD estimate based on 250 
observations over the most actively traded tenor historical dataset, 
during which the majority of the Risk Factors \6\ belonging to a 
``Market (Sub-portfolio) Group'' \7\ exhibited their highest stress MAD 
levels. The revisions are intended to provide enhanced details of the 
stress period MAD calculation and how such stress periods are selected 
across Risk Factors, but such revisions do not represent a change in 
the calculation of the Univariate Level Parameters.
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    \5\ The Integrated Spread Response Parameters capture credit 
spread and recovery rate fluctuations and is computed by creating 
profit/loss distributions from a set of jointly simulated 
hypothetical credit spread and recovery rate scenarios, such as 
Monte Carlo Value at Risk. The Integrated Spread Response Parameters 
are categorized into Univariate, Multivariate and Anti-
Procyclicality Level Parameters.
    \6\ With respect to credit default swap contracts, each 
underlying index, sub-index or single name reference entity is 
deemed a separate ``Risk Factor.''
    \7\ A Market (Sub-Portfolio) Group consists of Risk Factors that 
share similar market and risk profile characteristics such as 
geographical locations, hours of trading activity and stress 
periods.
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    Also, ICC proposes the addition of Table 2 to Section 1.7.1. of the 
RPSRP to provide an illustration of Market (Sub-portfolio) Group 
compositions across several Master Document Transaction Types \8\ 
(``MDTTs''). The purpose of Table 2 is to provide further details on 
the composition of the Market (Sub-portfolio) Groups by providing 
illustrative mapping of various Market (Sub-portfolio) Groups to the 
applicable MDTTs. Also, ICC has made conforming changes to Exhibit 5 
[sic], to account for the addition of Table 2. Finally, ICC proposes to 
update the RPSRP revision history to reflect the proposed changes.
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    \8\ Master Document Transaction Types refers to the 
``Transaction Types'' identified by the International Swaps and 
Derivatives Association, Inc. (IDSA) in the publication of their 
Credit Derivatives Physical Settlement Matrix.
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(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \9\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\10\ In particular, Section 17A(b)(3)(F) of the Act \11\ 
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 cleared by ICC; the safeguarding 
of securities and funds which are in the custody or control of ICC or 
for which it is responsible; and the protection of investors and the 
public interest. The proposed revisions to the RPSRP are limited to 
providing additional detail on the calculation of the stress period MAD 
which is used in the Univariate Level Parameters. ICC believes that the 
proposed additional details to the

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calculation of the stress period MAD enhance ICC policies, practices 
and procedures with respect to risk management. As such, the proposed 
rule change is designed to promote the prompt and accurate clearance 
and settlement of securities transactions, derivatives agreements, 
contracts, and transactions; to contribute to the safeguarding of 
securities and funds associated with security-based swap transactions 
in ICC's custody or control, or for which ICC is responsible; and, in 
general, to protect investors and the public interest within the 
meaning of Section 17A(b)(3)(F) of the Act.\12\
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    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22.
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ Id.
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    Rule 17Ad-22(e)(4)(ii) \13\ 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 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. 
ICC believes that the proposed changes provide additional clarity and 
more detail on ICC's current practices as to how a particular parameter 
is calculated in the RPSRP, which strengthens ICC's process for 
reviewing and setting the model core parameters and, in turn, serves to 
promote the soundness of ICC's risk management model and its ability to 
manage risks and maintain appropriate financial resources. Such changes 
enhance the readability and transparency of the RPSRP, 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).\14\
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    \13\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \14\ Id.
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    Rule 17Ad-22(e)(4)(vi)(B) \15\ 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 
RPSRP continues to provide a clear framework for ICC to set and review 
the risk management model core parameters and their underlying 
assumptions in the risk management model. The proposed changes provide 
additional clarity with respect to the Univariate Level Parameters 
associated with the integrated spread response model component. As 
such, ICC believes the proposed rule change is consistent with the 
requirements of Rule 17Ad-22(e)(4)(vi)(B).\16\
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    \15\ 17 CFR 240.17Ad-22(e)(4)(vi)(B).
    \16\ Id.
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    Rule 17Ad-22(e)(6)(i) \17\ 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 proposed clarifications would 
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).\18\
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    \17\ 17 CFR 240.17Ad-22(e)(6)(i).
    \18\ 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 rule change 
to update the ICC RPSRP 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \19\ and paragraph (f) of the Rule 19b-4 \20\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ICC-2023-011 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-2023-011. 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 (https://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

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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 a.m. and 3 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.ice.com/clear-credit/regulation.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-ICC-2023-011 and should 
be submitted on or before October 25, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21944 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P


