[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8447-8449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02399]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91024; File No. SR-ICC-2021-003]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC Operational Risk 
Management Framework

February 1, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
January 21, 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 revise the 
ICC Operational Risk Management Framework. 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 the Operational Risk Management Framework, 
which details ICC's dynamic and independent program of risk assessment 
and oversight that aims to reduce operational incidents, encourage 
process and control improvement, bring transparency to operational 
performance standard monitoring, and fulfill regulatory obligations. 
ICC believes 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.
    The proposed amendments incorporate reference to the 
Intercontinental Exchange, Inc. (``ICE, Inc.'') Enterprise Risk 
Management Policy (``ERM Policy'') and relevant regulations applicable 
to ICC as a covered clearing agency. The ICE, Inc. Enterprise Risk 
Management Department (``ERM'') provides the oversight and framework 
for identifying, assessing, managing, monitoring and reporting on risk 
across the ICE, Inc. organization and has dedicated resources focused 
on the various ICE, Inc. business units, including ICC. ERM, in 
conjunction with relevant ICC individuals, oversees the management of 
this Operational Risk Management Framework.
    ICC proposes updates to the risk assessment process in the 
Operational Risk Management Framework, which includes identifying, 
assessing, monitoring, and mitigating plausible sources of operational 
risk. Under the ``identify'' component, ICC proposes to more generally 
refer to its ``risk-scenario-based assessment methodology'' as its 
``risk-based assessment methodology,'' which more appropriately 
describes the methodology. ICC proposes similar changes throughout the 
risk assessment process to replace ``risk scenarios'' with ``risks.'' 
The proposed changes also cross reference the ERM Policy, noting that 
ERM maintains an inventory of material risks faced by the clearing 
house. Under the ``assess'' component, ICC proposes to incorporate the 
ERM

[[Page 8448]]

Policy and its relevant guidelines. ICC proposes minor clarifications 
with respect to the assessment of material risks and the controls and 
mitigations used to prevent risks from materializing. ICC proposes 
additional specifics relating to the determination of residual risk 
ratings for identified risks. ICC further proposes to reference the ERM 
Policy regarding risk scores and guidance relating to control 
identification, effectiveness assessment and testing, among others. 
With respect to the ``mitigate'' component, the proposed changes cross 
reference relevant guidelines in the ERM Policy and include minor 
updates regarding documenting output and reviewing risk assessments. 
The proposed changes also update the ``report'' component to more 
clearly state that ERM is responsible for operational risk reporting to 
appropriate parties.
    ICC proposes updates to Appendix 1 of the Operational Risk 
Management Framework that summarizes relevant regulatory requirements 
and industry guidance for ICC. Specifically, ICC proposes to reference 
its status as a covered clearing agency and to reference relevant 
regulations applicable to ICC as a covered clearing agency relating to 
operational risk requirements, namely Rules 17Ad-22(e)(17) and (21).\3\
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    \3\ 17 CFR 240.17Ad-22(e)(17) and (21).
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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 \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. ICC believes that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to Section 
17(A)(b)(3)(F),\7\ because the proposed rule change enhances ICC's 
ability to control its operational risk by ensuring that the 
Operational Risk Management Framework accurately reflects ICC's 
operational risk program, including the role of ERM and the regulatory 
operational risk requirements applicable to ICC. The proposed changes 
cross reference the ERM Policy and provide additional detail regarding 
ERM's role in the risk assessment process. The cross-references are 
intended to ensure clarity and consistency between relevant terms and 
processes across the Operational Risk Management Framework and the ERM 
Policy and are not intended to change the substance of either document. 
Additionally, the proposed changes reference regulations applicable to 
ICC as a covered clearing agency relating to operational risk 
requirements to ensure that relevant regulatory requirements are 
addressed as part of ICC's operational risk program. ICC believes that 
such changes further ensure that ICC, through its operational risk 
program, is able to manage its operational risks by identifying 
plausible sources of operational risk and mitigating their impact 
through the use of appropriate systems, policies, procedures, and 
controls to avoid disruptions to operations, thereby promoting the 
prompt and accurate clearance and settlement of securities 
transactions, derivatives agreements, contracts, and transactions; 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. 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.\8\
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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.
    \8\ Id.
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    The amendments would also satisfy relevant requirements of Rule 
17Ad-22.\9\ Rule 17Ad-22(e)(2)(i) and (v) \10\ 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. The Operational Risk Management 
Framework clearly assigns and documents responsibility and 
accountability for operational risk actions and decisions. The proposed 
changes more clearly specify the role of ERM in the risk assessment 
process. Moreover, the proposed revisions continue to allow for 
feedback from, and notification to, relevant stakeholders, such as ICC 
committees, management, and the Board. These governance arrangements 
are clear and transparent, such that information relating to the 
assignment of responsibilities and the requisite involvement of 
relevant committees and ICE, Inc. and ICC personnel is clearly 
documented. 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).\11\
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    \9\ 17 CFR 240.17Ad-22.
    \10\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \11\ Id.
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    Rule 17Ad-22(e)(17) \12\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to manage its operational risks by (i) 
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; (ii) ensuring 
that systems have a high degree of security, resiliency, operational 
reliability, and adequate, scalable capacity; and (iii) establishing 
and maintaining a business continuity plan that addresses events posing 
a significant risk of disrupting operations. The proposed 
clarifications regarding the risk assessment process would enhance 
ICC's ability to identify relevant sources of operational risk and 
mitigate their impact through the use of appropriate systems, policies, 
procedures, and controls, including by more specifically setting out 
the risk assessment process itself and the role and responsibilities of 
ERM regarding the identification, assessment, mitigation, and reporting 
of plausible sources of operational risk. Such amendments further 
strengthen the risk assessment process and enhance ICC's ability to 
ensure that systems have a high degree of security, resiliency, 
operational reliability, and adequate, scalable capacity. The proposed 
changes also update the regulatory operational risk requirements 
applicable to ICC as a covered clearing agency to ensure that ICC will 
continue to fulfill regulatory obligations, consistent with the 
requirements of Rule 17Ad-22(e)(17).\13\
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    \12\ 17 CFR 240.17Ad-22(e)(17).
    \13\ Id.

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[[Page 8449]]

    Rule 17Ad-22(e)(21) \14\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to be efficient and effective in meeting 
the requirements of its participants and the markets it serves, and 
have its management regularly review the efficiency and effectiveness 
of its (i) clearing and settlement arrangements; (ii) operating 
structure, including risk management policies, procedures, and systems; 
(iii) scope of products cleared or settled; and (iv) use of technology 
and communication procedures. As noted above, ERM provides the 
oversight and framework for identifying, assessing, managing, 
monitoring and reporting on risk across the ICE, Inc. organization and 
has dedicated resources focused on ICC, allowing ICC to be efficient 
and effective in meeting the requirements of its participants and the 
markets it serves. Moreover, the amended framework more clearly sets 
out the ERM function with respect to ICC to ensure the fulfillment of 
relevant responsibilities, thereby promoting ICC's ability to be 
efficient and effective in meeting the requirements of its participants 
and the markets it serves. Further, the proposed revisions clarify 
responsibilities regarding review of risk assessments and operational 
risk reporting to appropriate parties, which would promote management's 
regular review of the efficiency and effectiveness of ICC's clearing 
and settlement arrangements, operating structure, product scope, and 
use of technology and communication procedures. The proposed rule 
change is thus reasonably designed to meet the requirements of Rule 
17Ad-22(e)(21).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(21).
    \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 
the Operational Risk Management Framework will apply uniformly across 
all market participants. Therefore, ICC does not believe the amendments 
would impose any burden on competition not necessary or appropriate 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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="c3b1b6afa6eea0acaeaea6adb7b083b0a6a0eda4acb5">[email protected]</span></a>. Please include 
File Number SR-ICC-2021-003 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-2021-003. 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 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-2021-003 and should be 
submitted on or before February 26, 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. 2021-02399 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P


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