Federal Register / Vol. 83, No. 243 / Wednesday, December 19, 2018 / Notices 65195 

6 17 CFR 200.30–3(a)(31). 

1Capitalized terms used but not defined herein 

have the meanings specified in the Rules. 

2 15 U.S.C. 78s(b)(1). 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(3)(A). 

5 17 CFR 240.19b–4(f)(4)(ii). 

6Sub-account refers to the definition of Margin 

Account as per the Rules. 

proposed rule change (File Number SR– 

CboeBZX–2018–066). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2018–27406 Filed 12–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84810; File No. SR–ICEEU– 

2018–021] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change Relating to the 

F&O Stress Testing Policy 1

December 13, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),2 and Rule 19b–4 thereunder,3

notice is hereby given that on December 

6, 2018, ICE Clear Europe Limited (‘‘ICE 

Clear Europe’’ or ‘‘The Clearing House’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by ICE Clear 

Europe. ICE Clear Europe filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act,4 and Rule 

19b–4(f)(4)(ii) thereunder,5 so that the 

proposal was immediately effective 

upon filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

ICE Clear Europe proposes to update 

and formalize its Futures and Options 

Stress Testing Policy (the ‘‘F&O Stress 

Testing 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 

these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

ICE Clear Europe proposes to update 

and formalize its F&O Stress Testing 

Policy. The Clearing Risk Department is 

the owner of the F&O Stress Testing 

Policy and is responsible for ensuring 

that it remains up-to-date and that it is 

reviewed in accordance with policy 

requirements. The policy is to be 

reviewed annually by the F&O Risk 

Committee and the Board Risk 

Committee. 

The objective of the F&O Stress 

Testing Policy is to ensure the F&O 

Guaranty Fund is adequate to cover at 

least the two largest Clearing Member 

uncollateralised losses (i.e., losses over 

Clearing Member account’s 

requirements). The F&O Guaranty Fund 

protects the Clearing House against 

losses over and above margin that may 

be experienced during periods of 

extreme market volatility. Stress tests 

are used to test the adequacy of the F&O 

Guaranty Fund size. 

The F&O Stress Testing Policy 

describes ICE Clear Europe’s stress test 

principles, including frequency and 

reporting. The stress test results of 

Clearing Member portfolios are 

calculated daily and reported internally 

on a daily basis. The F&O Risk 

Committee reviews historical daily 

stress test results on a bi-monthly basis. 

The Clearing House will review 

internally the stress scenarios on a 

regular basis and inform the F&O Risk 

Committee where additions or changes 

to the scenarios employed have a 

material impact on the stress results. 

The F&O Stress Testing Policy also 

provides an overview of ICE Clear 

Europe’s stress loss calculation and 

stress shock calibration methodologies. 

The F&O Stress Testing Policy 

describes and defines the types of F&O 

stress testing scenarios and their 

application. The Clearing House has two 

types of scenarios used to size the F&O 

Guaranty Fund: Historical and 

theoretical scenarios. The historical 

stress scenarios aim to select the most 

significant historic events in terms of 

extreme price movement of the relevant 

underlyings, and then replicate as 

accurately as possible the historic event 

that has been selected across the full 

range of cleared products and apply 

these stress tests to contemporary 

positions. Theoretical scenarios are 

constructed using plausible 

combinations of extreme price moves 

that are not contained within the set of 

historical scenarios, including group or 

sector specific stresses. The 

development of these hypothetical and 

extreme scenarios is tailored to the 

specific risks of the products and 

markets served. They are designed to 

measure the response of Clearing 

Members’ portfolios to extreme 

conditions, and to assess the sufficiency 

of the available Guaranty Fund. 

Additionally, for other theoretical 

scenarios, ICE Clear Europe constructs 

theoretical scenarios, which are 

constructed of changes to 

macroeconomic events that are 

considered plausible given qualitative 

analysis of current market and 

geopolitical conditions. These scenarios 

are labelled ‘‘hypothetical’’. 

The policy also describes ICE Clear 

Europe’s reverse stress testing practices, 

which act as a tool to supplement 

existing stress analysis. Such scenarios 

follow the similar frequency and 

reporting as the standard stress test 

scenarios. Rather than sizing the F&O 

Guaranty Fund, these scenarios examine 

the magnitude of the stress required to 

exhaust the F&O Guaranty Fund size. 

Both historical reverse stress tests and 

theoretical reverse stress tests are 

performed. Reverse stress test scenarios 

results are reviewed and presented 

monthly to the F&O Risk Committee. 

The F&O Stress Testing Policy 

describes how ICE Clear Europe 

aggregates stress test results. The 

uncollateralised stress losses across all 

scenarios per Clearing Member and subaccount 6 are calculated. The worst case 

result for each Clearing Member, by subaccount including segregated sponsored 

principal accounts, is then compared 

with the margin account’s requirements 

in respect of the Clearing Member. 

Where the stress testing result is greater 

than the margin account’s requirements, 

by sub-account, this modelled loss 

above requirement or shortfall is 

recorded as an uncollateralised stress 

testing loss. In order to derive the two 

largest uncollateralised losses, 

individual uncollateralised stress loss at 

each Clearing Member account is 

aggregated into the financial institution 

group. 

The F&O Stress Testing Policy also 

describes how stress test results are 

reviewed and escalated. As noted above, 

daily stress testing results must be 


amozie on DSK3GDR082PROD with NOTICES1
65196 Federal Register / Vol. 83, No. 243 / Wednesday, December 19, 2018 / Notices 

7 15 U.S.C. 78q–1. 

8 17 CFR 240.17Ad–22. 

9 15 U.S.C. 78q–1(b)(3)(F). 

10 Id. 

11 17 CFR 240.17Ad–22. 

12 17 CFR 240.17Ad–22(e)(4). 

13 17 CFR 240.17Ad–22(e)(4)(ii). 

14 Id. 

15 17 CFR 240.17Ad–22(e)(4)(vi)(A). 

16 17 CFR 240.17Ad–22(e)(4)(i)–(iii). 

17 17 CFR 240.17Ad–22(e)(4)(vi)(A). 

18 17 CFR 240.17Ad–22(e)(4)(vi)(B)–(D). 

reviewed daily by Senior Clearing Risk 

Department staff. A bi-monthly 

summary of any significant events in the 

stress testing will be presented to the 

F&O Risk Committee. Further, trigger 

levels will be set to flag certain events, 

e.g. when a Clearing Member’s stressed 

losses exceed a predetermined 

percentage of its Original Margin 

requirement (but the change is not 

affecting the Guaranty Fund). In the 

event of a trigger of such event, Senior 

Clearing Risk Department staff will 

determine what action to follow, 

dependent on the nature of the event 

and Clearing Member to which it 

applies. The F&O Stress Testing Policy 

contains a non-exhaustive list of 

available actions. 

The F&O Stress Testing Policy also 

includes reference to the Board risk 

appetite, and lists the escalation and 

notification protocols for each risk 

appetite metric. Each risk appetite 

metric is calculated as per its 

predetermined frequency, has a defined 

threshold in accordance with the latest 

calibration process, and is routinely 

reported to the Board and its 

committees as part of the Risk Appetite 

Metric Dashboard. 

(b) Statutory Basis 

ICE Clear Europe believes that the 

proposed rule change is consistent with 

the requirements of Section 17A of the 

Act 7 and the regulations thereunder 

applicable to it, including the standards 

under Rule 17Ad–22.8 Section 

17A(b)(3)(F) of the Act 9 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. The F&O Stress Testing 

Policy sets forth the methodology by 

which ICE Clear Europe ensures that the 

Guaranty Fund is adequate to cover at 

least the two largest Clearing Member 

uncollateralised losses (i.e. losses over 

Clearing Member account’s 

requirements), in order to identify any 

potential deficiencies. Such testing 

ensures that ICE Clear Europe maintains 

the appropriate level of risk 

management resources to cover losses in 

the case of a default. As such, the 

proposed changes enhance ICE Clear 

Europe’s ability to manage risk, and 

therefore enhance ICE Clear Europe’s 

ability to promote the prompt and 

accurate clearance and settlement of 

securities transactions, derivatives 

agreements, contracts, and transactions 

and contribute to the safeguarding of 

securities and funds in ICE Clear 

Europe’s custody or control, within the 

meaning of Section 17A(b)(3)(F) of the 

Act.10

In addition, the proposed rule change 

is consistent with the relevant 

requirements of Rule 17Ad–22,11 and in 

particular Rule 17Ad–22(e)(4).12 Rule 

17Ad–22(e)(4)(ii) 13 requires, in relevant 

part, that a covered clearing agency 

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, 

for covered clearing agencies that are 

clearing agencies involved in activities 

with a more complex risk profile, 

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 F&O Stress Testing 

Policy contains stress testing practices 

designed to test the sufficiency of ICE 

Clear Europe’s F&O Guaranty Fund, and 

ensure that ICE Clear Europe maintains 

sufficient financial resources to 

withstand a default by the two Clearing 

Member families to which it has the 

largest aggregate exposure in extreme, 

but plausible market conditions, in 

accordance with Rule 17Ad– 

22(e)(4)(ii).14

Rule 17Ad–22(e)(4)(vi)(A) 15 requires, 

in relevant part, that a covered clearing 

agency establish, implement, maintain, 

and enforce written policies and 

procedures reasonably designed to test 

the sufficiency of its total financial 

resources available to meet the 

minimum financial resource 

requirements under Rule 17Ad– 

22(e)(4)(i) through (iii) 16 by conducting 

stress testing of its total financial 

resources once each day using standard 

predetermined parameters and 

assumptions. The F&O Stress Testing 

Policy describes and defines the types of 

F&O stress testing scenarios and their 

application. ICE Clear Europe uses the 

results of the stress testing scenarios to 

determine the sufficiency of its financial 

resources on a daily basis. Thus, the 

proposed rule change is consistent with 

the requirement of Rule 17Ad– 

22(e)(4)(vi)(A).17

Rules 17Ad–22(e)(4)(vi)(B) through 

(D) 18 require, in relevant part, that a 

covered clearing agency establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to: (i) Conduct a 

comprehensive analysis on at least a 

monthly basis of the existing stress 

testing scenarios, models, and 

underlying parameters and 

assumptions, and consider 

modifications to ensure they are 

appropriate for determining the covered 

clearing agency’s required level of 

default protection in light of current and 

evolving market conditions; (ii) conduct 

a comprehensive analysis of stress 

testing scenarios, models, and 

underlying parameters and assumptions 

more frequently than monthly when the 

products cleared or markets served 

display high volatility or become less 

liquid, or when the size or 

concentration of positions held by the 

covered clearing agency’s participants 

increases significantly; and (iii) report 

the results of the analyses described 

above to appropriate decision makers at 

the covered clearing agency, including 

but not limited to, its risk management 

committee or board of directors. 

Specifically, the F&O Stress Testing 

Policy contains certain requirements 

regarding routine review of the policy, 

including a requirement that the policy 

be kept up-to-date and annual review by 

ICE Clear Europe’s F&O Risk Committee 

and the Board Risk Committee. The F&O 

Stress Testing Policy also includes a 

notification and escalation process, 

which could, depending on the extent of 

the breach of pre-established thresholds 

could require a particular response and 

review of the response by the Executive 

Risk Committee or the Board Risk 

Committee. Further, the F&O Stress 

Testing Policy describes how stress test 

results are reviewed and escalated. 

Daily stress testing results must be 

reviewed daily by Senior Clearing Risk 

Department staff, and stress testing 

results are reported to the F&O Risk 

Committee. The F&O Stress Testing 

Policy also includes reference to Board 

escalation and notification protocols, 

based on pre-defined risk appetite 

metrics. As described above, the F&O 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 243 / Wednesday, December 19, 2018 / Notices 65197 

19 Id. 

20 17 CFR 240.17Ad–22(e)(2). 

21 Id. 22 17 CFR 200.30–3(a)(12). 

Stress Testing Policy sets forth ICE Clear 

Europe’s processes for review of the 

policy and stress testing results, and 

oversight by ICE Clear Europe’s Board 

and certain of its committees. As such, 

the proposed rule change is consistent 

with the requirement of Rule 17Ad– 

22(e)(4)(vi)(B) through (D).19

Rule 17Ad–22(e)(2) 20 requires, in 

relevant part, that a covered clearing 

agency establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to 

provide for governance arrangements 

that are clear and transparent and that 

specify clear and direct lines of 

responsibility. As detailed above, the 

F&O Stress Testing Policy sets forth the 

governance process for changes to the 

policy, as well as details the oversight 

by ICE Clear Europe’s Board and certain 

of its committees of the stress testing 

results. As such, ICE Clear Europe 

believes the changes are reasonably 

designed to meet the requirements of 

17Ad–22(e)(2).21

(B) Clearing Agency’s Statement on 

Burden on Competition 

ICE Clear Europe does not believe the 

proposed rule changes would have any 

impact, or impose any burden, on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The F&O Stress 

Testing Policy applies uniformly across 

all F&O Clearing Members. ICE Clear 

Europe does not believe that the 

formalization of the F&O Stress Testing 

Policy will otherwise impact 

competition among Clearing Members 

or other market participants, or affect 

the ability of market participants to 

access clearing generally. Therefore, ICE 

Clear Europe does not believe the 

proposed rule changes impose 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 comments received 

with respect to the proposed rule 

change. 

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 and paragraph (f) of Rule 

19b–4 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. 

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– 

ICEEU–2018–021 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–2018–021. 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–2018–021 

and should be submitted on or before 

January 9, 2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Eduardo A. Aleman, 

Deputy Secretary. 

[FR Doc. 2018–27405 Filed 12–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 10634] 

Notice of Public Meeting 

The Department of State will conduct 

an open meeting at 9:30 a.m. on 

Wednesday, January 9, 2019, at the 

headquarters of the Radio Technical 

Commission for Maritime Services 

(RTCM) in Suite 705, 1621 N Kent 

Street, Arlington, Virginia 22209. The 

primary purpose of the meeting is to 

prepare for the 6th session of the 

International Maritime Organization’s 

(IMO) Sub-Committee on Navigation, 

Communication, and Search and 

Rescue, to be held at the IMO 

Headquarters, United Kingdom, January 

21–25, 2019. 

The agenda items to be considered 

include: 

—Decisions of other IMO bodies 

—Routing measures and mandatory ship 

reporting systems 

—Updates to the LRIT system 

—Application of the ‘‘Indian Regional 

Navigation Satellite System (IRNSS)’’ 

in the maritime field and 

development of performance 

standards for shipborne IRNSS 

receiver equipment 

—Revised General requirements for 

shipborne radio equipment forming 

part of the GMDSS and for electronic 

navigational aids (resolution 

A.694(17)) relating to Built-In 

Integrity testing (BIIT) for navigation 

equipment 

—Guidelines on standardized modes of 

operation, S-mode 

—Develop guidance on definition and 

harmonization of the format and 


amozie on DSK3GDR082PROD with NOTICES1