36652 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 

36 17 CFR 200.30–3(a)(12). 

1A successor in interest is limited to an entity 

that results from a reorganization into another 

jurisdiction or a change in the type of business 

organization. 

2The Initial Fund and any Future Fund relying 

on the requested relief will do so in a manner 

consistent with the terms and conditions of the 

application. Applicants represent that any person 

presently intending to rely on the requested relief 

is listed as an applicant. 

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 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. 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–FINRA– 

2018–026 and should be submitted on 

or before August 20, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.36

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16166 Filed 7–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33168; 812–14853] 

OFI Carlyle Private Credit Fund and OC 

Private Capital, LLC; Notice of 

Application 

July 24, 2018. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application under section 

6(c) of the Investment Company Act of 

1940 (the ‘‘Act’’) for an exemption from 

sections 18(a)(2), 18(c), and 18(i) of the 

Act, pursuant to sections 6(c) and 23(c) 

of the Act, granting an exemption from 

rule 23c–3 under the Act, and for an 

order pursuant to section 17(d) of the 

Act and rule 17d–1 under the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order to permit certain 

registered closed-end management 

investment companies to issue multiple 

classes of shares of beneficial interest 

(‘‘Shares’’) and to impose asset-based 

service and/or distribution fees and 

early withdrawal charges. 

APPLICANTS: OFI Carlyle Private Credit 

Fund (the ‘‘Initial Fund’’) and OC 

Private Capital, LLC (the ‘‘Adviser’’). 

FILING DATES: The application was filed 

on December 15, 2017, and amended on 

March 26, 2018, June 6, 2018, and July 

3, 2018. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on August 17, 2018, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090; 

Applicants, 6803 South Tucson Way, 

Centennial, Colorado 80112. 

FOR FURTHER INFORMATION CONTACT: 

Kieran G. Brown, Senior Counsel, at 

(202) 551–6773 or Nadya B. Roytblat, 

Assistant Director, at (202) 551–6825 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. The Initial Fund is a Delaware 

statutory trust that is registered under 

the Act as a non-diversified, closed-end 

management investment company. The 

Initial Fund’s investment objective is to 

produce current income by 

opportunistically allocating its assets 

across a wide range of credit strategies. 

2. The Adviser, a Delaware limited 

liability company, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940. The 

Adviser serves as investment adviser to 

the Initial Fund. 

3. The applicants seek an order to 

permit the Initial Fund to issue multiple 

classes of Shares, each having its own 

fee and expense structure, and to 

impose asset-based service and/or 

distribution fees and early withdrawal 

charges. 

4. Applicants request that the order 

also apply to any other registered 

closed-end management investment 

company that conducts a continuous 

offering of its shares, existing now or in 

the future, for which the Adviser, its 

successors,1 or any entity controlling, 

controlled by, or under common control 

with the Adviser, or its successors, acts 

as investment adviser, and which 

provides periodic liquidity with respect 

to its Shares through tender offers 

conducted in compliance with either 

rule 23c–3 under the Act or rule 13e– 

4 under the Securities Exchange Act of 

1934 (the ‘‘1934 Act’’) (each such 

closed-end investment company, a 

‘‘Future Fund’’ and, together with the 

Initial Fund, each, a ‘‘Fund’’ and 

collectively, the ‘‘Funds’’).2

5. The Initial Fund currently issues a 

single class of Shares (the ‘‘Initial Class 

Shares’’). The Shares are currently being 

offered on a continuous basis pursuant 

to a registration statement under the 

Securities Act of 1933 at their net asset 

value per share plus the applicable sales 

load. The Initial Fund, as a closed-end 

investment company, does not 

continuously redeem Shares as does an 

open-end management investment 

company. Shares of the Initial Fund are 

not listed on any securities exchange 

and do not trade on an over-the-counter 

system such as NASDAQ. Applicants do 

not expect that any secondary market 

will ever develop for the Shares. 

6. If the requested relief is granted, the 

Initial Fund intends to offer multiple 

classes of Shares, such as the Initial 

Class Shares and a new Share class (the 

‘‘New Class Shares’’), or any other 

classes. Because of the different 

distribution fees, shareholder services 

fees, and any other class expenses that 

may be attributable to the different 

classes, the net income attributable to, 

and any dividends payable on, each 

class of Shares may differ from each 

other from time to time. 


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Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 36653 

3Any references to FINRA Rule 2341include any 

successor or replacement rule that may be adopted 

by the Financial Industry Regulatory Authority 

(‘‘FINRA’’). 

4See Shareholder Reports and Quarterly Portfolio 

Disclosure of Registered Management Investment 

Companies, Investment Company Act Release No. 

26372 (Feb. 27, 2004) (adopting release) (requiring 

open-end investment companies to disclose fund 

expenses in shareholder reports); and Disclosure of 

Breakpoint Discounts by Mutual Funds, Investment 

Company Act Release No. 26464 (June 7, 2004) 

(adopting release) (requiring open-end investment 

companies to provide prospectus disclosure of 

certain sales load information). 

5Fund of Funds Investments, Investment 

Company Act Rel. Nos. 26198 (Oct. 1, 2003) 

(proposing release) and 27399 (Jun. 20, 2006) 

(adopting release). See also rules 12d1–1, et seq. of 

the Act. 

6Unlike a distribution-related charge, the 

repurchase fee is payable to the Fund to 

compensate long-term shareholders for the 

expenses related to shorter-term investors, in light 

of the Fund’s generally longer-term investment 

horizons and investment operations. 

7. Applicants state that, from time to 

time, the Board of a Fund may create 

additional classes of Shares, or may vary 

the characteristics described of the 

Initial Class and New Class Shares, 

including without limitation, in the 

following respects: (1) The amount of 

fees permitted by different distribution 

plans or different service fee 

arrangements; (2) voting rights with 

respect to a distribution plan of a class; 

(3) different class designations; (4) the 

impact of any class expenses directly 

attributable to a particular class of 

Shares allocated on a class basis as 

described in the application; (5) 

differences in any dividends and net 

asset values per Share resulting from 

differences in fees under a distribution 

plan or in class expenses; (6) any early 

withdrawal charge or other sales load 

structure; and (7) any exchange or 

conversion features, as permitted under 

the Act. 

8. Applicants state that, in order to 

provide some liquidity to shareholders, 

the Initial Fund is structured as an 

‘‘interval fund’’ and makes quarterly 

offers to repurchase between 5% and 

25% of its outstanding Shares at net 

asset value, pursuant to rule 23c–3 

under the Act, unless such offer is 

suspended or postponed in accordance 

with regulatory requirements. Any other 

investment company that intends to rely 

on the requested relief will provide 

periodic liquidity to shareholders in 

accordance with either rule 23c–3 under 

the Act or rule 13e–4 under the 1934 

Act. 

9. Applicants represent that any assetbased service and/or distribution fees of 

a Fund will comply with the provisions 

of Rule 2341 of the Rules of the 

Financial Industry Regulatory Authority 

(‘‘FINRA Rule 2341’’) as if that rule 

applied to the Fund.3 Applicants also 

represent that each Fund will disclose 

in its prospectus the fees, expenses and 

other characteristics of each class of 

Shares offered for sale by the 

prospectus, as is required for open-end, 

multiple class funds under Form N–1A. 

As is required for open-end funds, each 

Fund will disclose its expenses in 

shareholder reports, and describe any 

arrangements that result in breakpoints 

in, or elimination of, sales loads in its 

prospectus.4 In addition, applicants will 

comply with applicable enhanced fee 

disclosure requirements for fund of 

funds, including registered funds of 

hedge funds.5

10. Each Fund and its distributor (the 

‘‘Distributor’’) will also comply with 

any requirements that may be adopted 

by the Commission or FINRA regarding 

disclosure at the point of sale and in 

transaction confirmations about the 

costs and conflicts of interest arising out 

of the distribution of open-end 

investment company shares, and 

regarding prospectus disclosure of sales 

loads and revenue sharing arrangements 

as if those requirements applied to the 

Fund and the Distributor. Each Fund or 

the Distributor will contractually 

require that any other distributor of the 

Fund’s Shares comply with such 

requirements in connection with the 

distribution of Shares of the Fund. 

11. Each Fund will allocate all 

expenses incurred by it among its 

various classes of Shares based on the 

net assets of the Fund attributable to 

each class, except that the net asset 

value and expenses of each class will 

reflect distribution fees, service fees, 

and any other incremental expenses of 

that class. Expenses of a Fund allocated 

to a particular class of the Fund’s Shares 

will be borne on a pro rata basis by each 

outstanding Share of that class. 

Applicants state that each Fund will 

comply with the provisions of rule 18f– 

3 under the Act as if it were an openend investment company. 

12. Applicants state that the Initial 

Fund does not intend to offer any 

exchange privilege or conversion 

feature, but any such privilege or feature 

introduced in the future by a Fund will 

comply with rule 11a–1, rule 11a–3, and 

rule 18f–3 as if the Fund were an openend investment company. 

13. Applicants state that the Initial 

Fund does not currently intend to 

impose an early withdrawal charge. 

However, in the future a Fund may 

impose an early withdrawal charge on 

shares submitted for repurchase that 

have been held less than a specified 

period. The Fund may waive the early 

withdrawal charge for certain categories 

of shareholders or transactions to be 

established from time to time. 

Applicants state that each Fund will 

apply the early withdrawal charge (and 

any waivers or scheduled variations of 

the early withdrawal charge) uniformly 

to all shareholders in a given class and 

consistently with the requirements of 

rule 22d–1 under the Act as if the Fund 

was an open-end investment company. 

14. The Initial Fund, operating as an 

interval fund pursuant to rule 23c–3 

under the Act, does not intend to, but 

a Fund may, offer its shareholders an 

exchange feature under which the 

shareholders of the Fund may, in 

connection with the Fund’s periodic 

repurchase offers, exchange their Shares 

of the Fund for shares of the same class 

of (i) registered open-end investment 

companies or (ii) other registered 

closed-end investment companies that 

comply with rule 23c–3 under the Act 

and continuously offer their shares at 

net asset value, that are in the Fund’s 

group of investment companies 

(collectively, the ‘‘Other Funds’’). 

Shares of a Fund operating pursuant to 

rule 23c–3 that are exchanged for shares 

of Other Funds will be included as part 

of the repurchase offer amount for such 

Fund as specified in rule 23c–3 under 

the Act. Any exchange option will 

comply with rule 11a–3 under the Act, 

as if the Fund were an open-end 

investment company subject to rule 

11a–3. In complying with rule 11a–3 

under the Act, each Fund will treat an 

early withdrawal charge as if it were a 

contingent deferred sales load. 

15. Applicants state that the Initial 

Fund does not currently intend to 

impose a repurchase fee, but may do so 

in the future.6 If a Fund charges a 

repurchase fee, Shares of the Fund will 

be subject to a repurchase fee at a rate 

of no greater than 2% of the 

shareholder’s repurchase proceeds if the 

interval between the date of purchase of 

the Shares and the valuation date with 

respect to the repurchase of those 

Shares is less than one year. Repurchase 

fees, if charged, will equally apply to all 

classes of Shares of the Fund, consistent 

with section 18 of the Act and rule 18f– 

3 thereunder. To the extent a Fund 

determines to waive, impose scheduled 

variations of, or eliminate a repurchase 

fee, it will do so consistently with the 

requirements of rule 22d–1 under the 

Act as if the repurchase fee were a 

contingent deferred sales load and as if 

the Fund were a registered open-end 

investment company and the Fund’s 

waiver of, scheduled variation in, or 

elimination of, the repurchase fee will 


daltland on DSKBBV9HB2PROD with NOTICES
36654 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 

apply uniformly to all shareholders of 

the Fund regardless of class. 

Applicants’ Legal Analysis 

Multiple Classes of Shares 

1. Section 18(a)(2)(A) and (B) makes it 

unlawful for a registered closed-end 

investment company to issue a senior 

security that is a stock unless (a) 

immediately after such issuance it will 

have an asset coverage of at least 200% 

and (b) provision is made to prohibit the 

declaration of any distribution, upon its 

common stock, or the purchase of any 

such common stock, unless in every 

such case such senior security has at the 

time of the declaration of any such 

distribution, or at the time of any such 

purchase, an asset coverage of at least 

200% after deducting the amount of 

such distribution or purchase price, as 

the case may be. Applicants state that 

the creation of multiple classes of shares 

of the Funds may violate section 

18(a)(2) because the Funds may not 

meet such requirements with respect to 

a class of shares that may be a senior 

security. 

2. Section 18(c) of the Act provides, 

in relevant part, that a registered closedend investment company may not issue 

or sell any senior security if, 

immediately thereafter, the company 

has outstanding more than one class of 

senior security. Applicants state that the 

creation of multiple classes of Shares of 

a Fund may be prohibited by section 

18(c), as a class may have priority over 

another class as to payment of 

dividends because shareholders of 

different classes would pay different 

fees and expenses. 

3. Section 18(i) of the Act provides 

that each share of stock issued by a 

registered management investment 

company will be a voting stock and 

have equal voting rights with every 

other outstanding voting stock. 

Applicants state that permitting 

multiple classes of Shares of a Fund 

may violate section 18(i) of the Act 

because each class would be entitled to 

exclusive voting rights with respect to 

matters solely related to that class. 

4. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction or any 

class or classes of persons, securities or 

transactions from any provision of the 

Act, or from any rule or regulation 

under the Act, if and to the extent such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Applicants 

request an exemption under section 6(c) 

from sections 18(a)(2), 18(c) and 18(i) to 

permit the Funds to issue multiple 

classes of Shares. 

5. Applicants submit that the 

proposed allocation of expenses relating 

to distribution and voting rights among 

multiple classes is equitable and will 

not discriminate against any group or 

class of shareholders. Applicants submit 

that the proposed arrangements would 

permit each Fund to facilitate the 

distribution of its Shares and provide 

investors with a broader choice of 

shareholder options. Applicants assert 

that the proposed closed-end 

investment company multiple class 

structure does not raise the concerns 

underlying section 18 of the Act to any 

greater degree than open-end 

investment companies’ multiple class 

structures that are permitted by rule 

18f–3 under the Act. Applicants state 

that each Fund will comply with the 

provisions of rule 18f–3 as if it were an 

open-end investment company. 

Early Withdrawal Charges 

1. Section 23(c) of the Act provides, 

in relevant part, that no registered 

closed-end investment company shall 

purchase securities of which it is the 

issuer, except: (a) On a securities 

exchange or other open market; (b) 

pursuant to tenders, after reasonable 

opportunity to submit tenders given to 

all holders of securities of the class to 

be purchased; or (c) under other 

circumstances as the Commission may 

permit by rules and regulations or 

orders for the protection of investors. 

2. Rule 23c–3 under the Act permits 

a registered closed-end investment 

company (an ‘‘interval fund’’) to make 

repurchase offers of between five and 

twenty-five percent of its outstanding 

shares at net asset value at periodic 

intervals pursuant to a fundamental 

policy of the interval fund. Rule 23c– 

3(b)(1) under the Act permits an interval 

fund to deduct from repurchase 

proceeds only a repurchase fee, not to 

exceed two percent of the proceeds, that 

is paid to the interval fund and is 

reasonably intended to compensate the 

fund for expenses directly related to the 

repurchase. 

3. Section 23(c)(3) provides that the 

Commission may issue an order that 

would permit a closed-end investment 

company to repurchase its shares in 

circumstances in which the repurchase 

is made in a manner or on a basis that 

does not unfairly discriminate against 

any holders of the class or classes of 

securities to be purchased. 

4. Applicants request relief under 

section 6(c), discussed above, and 

section 23(c)(3) from rule 23c–3 to the 

extent necessary for each Fund to 

impose early withdrawal charges on 

shares of the Fund submitted for 

repurchase that have been held for less 

than a specified period. 

5. Applicants state that the early 

withdrawal charges they intend to 

impose are functionally similar to 

contingent deferred sales loads imposed 

by open-end investment companies 

under rule 6c–10 under the Act. Rule 

6c–10 permits open-end investment 

companies to impose contingent 

deferred sales loads, subject to certain 

conditions. Applicants note that rule 

6c–10 is grounded in policy 

considerations supporting the 

employment of contingent deferred 

sales loads where there are adequate 

safeguards for the investor and state that 

the same policy considerations support 

imposition of early withdrawal charges 

in the interval fund context. In addition, 

applicants state that early withdrawal 

charges may be necessary for the Fund’s 

Distributor to recover distribution costs. 

Applicants represent that any early 

withdrawal charge imposed by a Fund 

will comply with rule 6c–10 under the 

Act as if the rule were applicable to 

closed-end investment companies. Each 

Fund will disclose early withdrawal 

charges in accordance with the 

requirements of Form N–1A concerning 

contingent deferred sales loads. 

Asset-Based Service and/or Distribution 

Fees 

1. Section 17(d) of the Act and rule 

17d–1 under the Act prohibit an 

affiliated person of a registered 

investment company or an affiliated 

person of such person, acting as 

principal, from participating in or 

effecting any transaction in connection 

with any joint enterprise or joint 

arrangement in which the investment 

company participates unless the 

Commission issues an order permitting 

the transaction. In reviewing 

applications submitted under section 

17(d) and rule 17d–1, the Commission 

considers whether the participation of 

the investment company in a joint 

enterprise or joint arrangement is 

consistent with the provisions, policies 

and purposes of the Act, and the extent 

to which the participation is on a basis 

different from or less advantageous than 

that of other participants. 

2. Rule 17d–3 under the Act provides 

an exemption from section 17(d) and 

rule 17d–1 to permit open-end 

investment companies to enter into 

distribution arrangements pursuant to 

rule 12b–1 under the Act. Applicants 

request an order under section 17(d) and 

rule 17d–1 under the Act to permit the 

Fund to impose asset-based service and/ 

or distribution fees. Applicants have 

agreed to comply with rules 12b–1 and 


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Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Notices 36655 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–83386 

(June 6, 2018), 83 FR 27360 (June 12, 2018) (SR– 

ICC–2018–004) (‘‘Notice’’). 

4Notice, 83 FR at 27361. Capitalized terms used 

herein but not otherwise defined have the meaning 

set forth in the Framework and ICE Clear Europe 

rulebook, which is available at https://

www.theice.com/clear-europe/regulation#rulebook. 

5Notice, 83 FR at 27361. 

6 Id. 

7 Id. 

8Notice, 83 FR at 27361. 

9 Id. 

10 Id. 

11 Id. 

12 Id. 

17d–3 as if those rules applied to 

closed-end investment companies, 

which they believe will resolve any 

concerns that might arise in connection 

with a Fund financing the distribution 

of its shares through asset-based service 

and/or distribution fees. 

For the reasons stated above, 

applicants submit that the exemptions 

requested under section 6(c) are 

necessary and appropriate in the public 

interest and are consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the Act. Applicants further 

submit that the relief requested 

pursuant to section 23(c)(3) will be 

consistent with the protection of 

investors and will insure that applicants 

do not unfairly discriminate against any 

holders of the class of securities to be 

purchased. Finally, applicants state that 

the Funds’ imposition of asset-based 

service and/or distribution fees is 

consistent with the provisions, policies 

and purposes of the Act and does not 

involve participation on a basis different 

from or less advantageous than that of 

other participants. 

Applicants’ Condition 

Applicants agree that any order 

granting the requested relief will be 

subject to the following condition: 

Each Fund relying on the requested 

order will comply with the provisions of 

rules 6c–10, 12b–1, 17d–3, 18f–3, 22d– 

1 and, where applicable, 11a–3 under 

the Act, as amended from time to time 

or replaced, as if those rules applied to 

closed-end management investment 

companies, and will comply with 

FINRA Rule 2341, as amended from 

time to time, as if that rule applied to 

all closed-end management investment 

companies. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–16154 Filed 7–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83690; File No. SR–ICC– 

2018–004] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Approving 

Proposed Rule Change Relating To 

Formalization of the ICC Model 

Validation Framework 

July 24, 2018. 

I. Introduction 

On May 23, 2018, ICE Clear Credit 

LLC (‘‘ICC’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

formalize the ICC Model Validation 

Framework. The proposed rule change 

was published in the Federal Register 

on June 12, 2018.3 The Commission has 

not received any comments on the 

proposed rule change. For the reasons 

discussed below, the Commission is 

approving the proposed rule change. 

II. Description of the Proposed Rule 

Change 

The proposed rule change would 

formalize the ICC Model Validation 

Framework (‘‘Framework’’), which sets 

forth ICC’s model validation 

procedures.4 Through the use of these 

model validation procedures, ICC 

determines the effectiveness of the risk 

models underpinning ICC’s risk 

management system, considers new 

components and enhancements to 

existing components of the risk models, 

and monitors and validates on an 

ongoing basis the risk models. The 

Framework also describes the personnel 

responsible for, and the governance 

process associated with, the successful 

operation and maintenance of the model 

validation procedures. Specifically, the 

Framework designates ICC’s Risk 

Oversight Officer (‘‘ROO’’) as the 

Framework owner and makes the ROO 

responsible to the ICC President for the 

successful operation and maintenance 

of the Framework.5

ICC has a proprietary risk 

management system that uses models to 

assess the risk of the credit default 

swap-based portfolios that ICC clears. 

ICC uses its risk management system to 

determine the appropriate Initial Margin 

and Guaranty Fund requirements that 

offset the risks of the credit default 

swap-based portfolios ICC clears. The 

risk management system is composed of 

risk model components (‘‘Model 

Components’’), which employ a 

combination of statistical analysis of 

credit spread time series and stress test 

simulation scenarios to address different 

sources of risk. These sources of risk 

addressed by the Model Components 

constitute the foundation of total Initial 

Margin and Guaranty Fund 

requirements for the credit default 

swap-based portfolios that ICC clears.6

The Framework considers both new 

Model Components and enhancements 

to existing Model Components 

(collectively, ‘‘Model Change’’). New 

Model Components consider sources of 

risk that are not currently included in 

the risk management system.7

Enhancements to existing Model 

Components improve upon the 

methodologies already used by the risk 

management system to consider a given 

source or sources of risk.8 The 

Framework classifies Model Changes as 

either Materiality A or Materiality B, 

depending on how substantially the 

Model Change affects the risk 

management system’s assessment of risk 

for the related source or sources of risk.9

Materiality A Model Changes 

substantially affect the risk management 

system’s assessment of risk for the 

related source or sources of risk. 

Materiality B Model Changes do not 

substantially affect the risk management 

system’s assessment of risk for the 

related source or sources of risk. The 

Framework requires that the ICC Chief 

Risk Officer (‘‘CRO’’) and the ROO 

review and determine which 

enhancements to the risk management 

system qualify as Model Changes and 

classify Model Changes as Materiality A 

or B.10 The Framework requires that the 

ICC Risk Committee review the 

materiality classifications and provide 

feedback as necessary.11 The 

Framework also describes the Model 

Inventory which is maintained by the 

ICC Risk Department and which 

contains key information about all 

Model Components and Model 

Changes.12 The Framework requires that 

the ICC ROO review the model 


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