[Federal Register Volume 87, Number 64 (Monday, April 4, 2022)]
[Notices]
[Pages 19563-19565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06983]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94544; File No. SR-ICC-2022-002]


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

March 29, 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 March 22, 2022, ICE Clear Credit LLC (``ICC'') 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 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 make 
changes to ICC's Risk Parameter Setting and Review Policy. 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 revising its Risk Parameter Setting and Review Policy, 
which describes the process of setting and reviewing the risk 
management model core parameters and the performance of sensitivity 
analyses related to certain parameter settings. 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 amend the ``Univariate Level Parameters'' 
subsection (Subsection 1.7.1), which describes the univariate level 
parameters associated with the integrated spread response model 
component. For single name risk factors, ICC proposes to clarify how 
the end-of-day (``EOD'') recovery rate is derived from quotes. The 
proposed changes describe how the EOD recovery rate would deviate when 
the single name risk factor is distressed. The proposed language 
further specifies the role of the established EOD recovery rate upon 
using the ISDA Standard Model in terms of price-to-spread mapping. 
Finally, ICC proposes to update the revision history to reflect the 
proposed changes accordingly. Overall, the proposed amendments are 
intended to serve as clarifications and would not change the 
methodology.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \3\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\4\ In particular, Section 17A(b)(3)(F) of the Act \5\ 
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. The revisions are limited to clarification changes and 
would not amend the methodology. As described above, for single name 
risk factors, ICC proposes to clarify how the EOD recovery rate is 
derived from quotes. The proposed changes also describe how the EOD 
recovery rate would deviate when the single name risk factor is 
distressed and the role of the established EOD recovery rate in respect 
of the ISDA Standard Model. Such changes would ensure transparency and 
clarity in the Risk Parameter Setting and Review Policy with respect to 
ICC's parameter setting and calibration process to support the 
effectiveness of ICC's risk management system. The proposed rule change 
is therefore consistent with the prompt and accurate clearing and 
settlement of the contracts 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, within the meaning of Section 17A(b)(3)(F) of the Act.\6\
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    \3\ 15 U.S.C. 78q-1.
    \4\ 17 CFR 240.17Ad-22.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.

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[[Page 19564]]

    Rule 17Ad-22(e)(4)(ii) \7\ 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 in 
the Risk Parameter Setting and Review Policy, 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, 
its ability to manage risks and maintain appropriate financial 
resources. Such changes enhance the readability and transparency of the 
Risk Parameter Setting and Review Policy, 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).\8\
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    \7\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \8\ Id.
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    Rule 17Ad-22(e)(4)(vi)(B) \9\ 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 
Risk Parameter Setting and Review Policy continues to provide a clear 
framework for ICC to set and review the model core parameters and 
perform sensitivity analyses related to certain parameter settings on 
at least a monthly basis. The proposed changes provide additional 
clarity with respect to the univariate level parameters and do not 
change ICC's methodology. As such, ICC believes the proposed rule 
change is consistent with the requirements of Rule 17Ad-
22(e)(4)(vi)(B).\10\
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    \9\ 17 CFR 240.17Ad-22(e)(4)(vi)(B).
    \10\ Id.
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    Rule 17Ad-22(e)(6)(i) \11\ 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).\12\
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    \11\ 17 CFR 240.17Ad-22(e)(6)(i).
    \12\ 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 
ICC's Risk Parameter Setting and Review Policy 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

    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#b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7"><span class="__cf_email__" data-cfemail="d5a7a0b9b0f8b6bab8b8b0bba1a695a6b0b6fbb2baa3">[email protected]</span></a>. Please include 
File Number SR-ICC-2022-002 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-2022-002. 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.

[[Page 19565]]

You should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2022-002 
and should be submitted on or before April 25, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06983 Filed 4-1-22; 8:45 am]
BILLING CODE 8011-01-P


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