51204 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices 

9See supra note 3. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 3 15 U.S.C. 78q–1. 

however, by not more than 60 days if 

the Commission determines that a 

longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for comment in 

the Federal Register on March 19, 

2021.9 The 180th day after publication 

of the proposed rule change is 

September 15, 2021. The Commission is 

extending the time period for approving 

or disapproving the proposed rule 

change for an additional 60 days. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to issue an order 

approving or disapproving the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change 

and the issues raised in the comment 

letters that have been submitted in 

connection therewith. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,10 designates 

November 14, 2021, as the date by 

which the Commission shall either 

approve or disapprove the proposed 

rule change (File Number SR– 

CboeBZX–2021–019). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–19726 Filed 9–13–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92893; File No. SR–ICC– 

2021–018] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to the 

ICC Back-Testing Framework 

September 8, 2021. 

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 August 24, 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. 

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 

ICE CDS Clearing: Back-Testing 

Framework (‘‘Back-Testing 

Framework’’) to include additional 

description on the lookback period for 

back-testing and other clarifications. 

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, securitybased 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 the BackTesting Framework, which describes 

ICC’s back-testing approach and 

procedures and includes guidelines for 

remediating poor back-testing results. 

The proposed amendments include 

additional description on the lookback 

period for back-testing and other 

clarifications. 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 a clarification change in 

Subsection 1.2. The Back-Testing 

Framework discusses ICC’s back-testing 

analysis, which verifies that the number 

of actual losses is consistent with the 

number of projected losses. The 

proposed clarification to Subsection 1.2 

specifies that the ICC Risk Department 

may consider back-testing analysis 

based on alternative statistical tests to 

assess the performance of its models in 

terms of statistical reliability. 

ICC proposes new Subsection 2.1 to 

include additional description on the 

lookback period for back-testing. 

Proposed Subsection 2.1 details the 

performance of back-testing analysis for 

Clearing Participant (‘‘CP’’) related 

portfolios. The proposed language 

discusses the maximum back-testing 

sample size, or the lookback period, and 

the benefit of allowing for a greater 

sample size in terms of assessing model 

performance. The proposed language 

also analyzes short lookback periods in 

combination with high risk quantile 

estimates. Moreover, ICC proposes to 

reference an alternative statistical test 

and describe how the model is 

considered to pass or fail the test. 

Proposed Figure 1 serves as an 

illustration under such alternative 

statistical test across different sample 

sizes and risk quantiles. Following such 

analysis, proposed Subsection 2.1 sets 

out ICC’s rationale for the minimum 

back-testing window length. Further, 

proposed Subsection 2.1 references the 

performance of additional analyses, as 

described in Section 4 of the BackTesting Framework, and includes 

language concerning the reporting of 

back-testing results. ICC proposes to 

renumber the following subsections 

accordingly. 

ICC proposes additional clarifications 

to the Back-Testing Framework. The 

proposed amendments include a 

footnote in amended Subsection 2.6 that 

references a relevant Commodity 

Futures Trading Commission regulation 

with respect to ICC’s performance of 

back-testing analysis. ICC further 

proposes amendments to Section 4, 

which contains guidelines for 

remediating poor back-testing results. 

Currently, poor back-testing results 

require a peer review of the risk models 

by the Risk Working Group (‘‘RWG’’), 

which is comprised of risk 

representatives from ICC’s CPs, and 

remedial actions to improve model 

performance. The proposed changes 

describe an additional aspect presented 

to the RWG and note an assessment that 

corresponds to the performance of a 

back-testing analysis without 

overlapping periods. ICC also proposes 

to update Section 5, containing a list of 

references, to include a reference for the 

alternative statistical test described in 

proposed Subsection 2.1. 

(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 


tkelley on DSK125TN23PROD with NOTICES
Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices 51205 

4 17 CFR 240.17Ad–22. 

5 15 U.S.C. 78q–1(b)(3)(F). 

6 Id. 

7 17 CFR 240.17Ad–22(e)(2)(i) and (v). 

8 Id. 

9 17 CFR 240.17Ad–22(e)(4)(ii). 

10 Id. 

11 17 CFR 240.17Ad–22(e)(6)(vi). 12 Id. 

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 proposed amendments 

include additional description on the 

lookback period for back-testing and 

other clarifications. Proposed 

Subsection 2.1 sets out ICC’s rationale 

for the minimum back-testing window 

length. The new subsection is intended 

to provide additional description and 

analysis on the lookback period for 

back-testing and would not change the 

methodology. The additional revisions 

further ensure clarity and transparency 

with respect to ICC’s back-testing 

approach, procedures, and guidelines 

for remediating poor back-testing 

results. The proposed footnote 

references a relevant regulation to 

ensure ICC’s performance of backtesting analysis is in compliance with 

applicable requirements. As such, ICC 

believes that the proposed rule change 

would help assure the soundness of the 

model by ensuring that back-testing 

analysis is conducted properly to assess 

the performance of the model. 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

Rule 17Ad–22(e)(2)(i) and (v) 7

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. ICC’s 

Back-Testing Framework clearly assigns 

and documents responsibility and 

accountability for performing backtesting analyses and remediating poor 

back-testing results. Amended 

Subsection 4 describes an additional 

aspect presented to the RWG and notes 

an assessment that corresponds to the 

performance of a back-testing analysis 

without overlapping periods. ICC 

believes that specifying these additional 

responsibilities would strengthen the 

governance arrangements in the BackTesting Framework and the BackTesting Framework would continue to 

ensure that ICC maintains clear and 

transparent governance procedures and 

arrangements with respect to the 

performance, review, and reporting of 

back-testing results and the remediation 

of poor back-testing results. As such, 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).8

Rule 17Ad–22(e)(4)(ii) 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 

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. As discussed above, 

proposed Subsection 2.1 would provide 

additional description and analysis on 

the lookback period for back-testing and 

would not change the methodology. The 

additional revisions enhance the clarity 

and transparency of the Back-Testing 

Framework, which would strengthen 

the documentation and ensure that it 

remains up-to-date, clear, and 

transparent. ICC believes that the 

proposed changes would enhance ICC’s 

ability to manage risks and maintain 

appropriate financial resources, 

including by ensuring that back-testing 

analysis is conducted properly to assess 

the performance of the model. 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).10

Rule 17Ad–22(e)(6)(vi) 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, is monitored by 

management on an ongoing basis and is 

regularly reviewed, tested, and verified 

by (A) conducting back-tests of its 

margin model at least once each day 

using standard predetermined 

parameters and assumptions; and (B) 

conducting a sensitivity analysis of its 

margin model and a review of its 

parameters and assumptions for backtesting on at least a monthly basis, and 

considering modifications to ensure the 

back-testing practices are appropriate 

for determining the adequacy of ICC’s 

margin resources. The Back-Testing 

Framework continues to require the 

performance of daily, weekly, monthly, 

and quarterly portfolio-level backtesting analyses, the performance of 

monthly parameter reviews and 

parameter sensitivity analyses, and the 

remediation of poor-back-testing results. 

The proposed amendments consist of 

additional description on the lookback 

period for back-testing and other 

clarifications regarding back-testing 

analysis and the remediation of poor 

back-testing results. These procedures 

in the Back-Testing Framework 

continue to promote the soundness of 

ICC’s model and ensure that ICC’s risk 

management system is effective and 

appropriate in addressing the risks 

associated with discharging its 

responsibilities. The proposed changes 

are thus consistent with the 

requirements of Rule 17Ad– 

22(e)(6)(vi).12

(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 BackTesting Framework 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. 


tkelley on DSK125TN23PROD with NOTICES
51206 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Self-Regulatory Organizations; ICE Clear Credit 

LLC; Notice of Filing of Proposed Rule Change 

Relating to the ICC Exercise Procedures; Exchange 

Act Release No. 92468 (July 28, 2021); 86 FR 40665 

(July 28, 2021) (SR–ICC–2021–016) (‘‘Notice’’). 

4Capitalized terms not otherwise defined herein 

have the meanings assigned to them in the ICC 

Rules, as applicable. 5The description of the proposed rule change is 

excerpted substantially from the Notice. 

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: 

• 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– 

ICC–2021–018 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–2021–018. 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–2021–018 and 

should be submitted on or before 

October 5, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–19725 Filed 9–13–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92895; File No. SR–ICC– 

2021–016] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Approving 

Proposed Rule Change Relating to the 

ICC Exercise Procedures 

September 8, 2021. 

I. Introduction 

On July 8, 2021, 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, (the 

‘‘Act’’),1 and Rule 19b–4,2 a proposed 

rule change to revise the Exercise 

Procedures in connection with the 

clearing of credit default index 

swaptions (‘‘Index Swaptions’’). The 

proposed rule change was published for 

comment in the Federal Register on July 

28, 2021.3 The Commission did not 

receive comments regarding 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 Exercise Procedures supplement 

the provisions of Subchapter 26R of the 

ICC Clearing Rules (the ‘‘Rules’’) with 

respect to Index Swaptions and provide 

further detail as to the manner in which 

Index Swaptions may be exercised by 

Swaption Buyers, the manner in which 

ICC will assign such exercises to 

Swaption Sellers, and certain actions 

that ICC may take in the event of 

technical issues.4 The proposed rule 

change would amend two sections of 

the Exercise Procedures: Paragraph 2.6 

Exercise System Failure and Paragraph 

2.8 Automatic Exercise for Exercise 

System Failure.5

A. Paragraph 2.6 Exercise System 

Failure 

Currently, in the event that ICC’s 

electronic system for the submission 

and assignment of Swaption Exercise 

Notices (ICC’s ‘‘Exercise System’’) fails 

to be in operation under certain 

circumstances, the Exercise Procedures 

provide ICC with the following options: 

(i) Cancel and reschedule the Exercise 

Period (i.e., the period on the expiration 

date of an Index Swaption during which 

the Swaption Buyer may deliver an 

exercise notice to ICC to exercise all or 

part of such Index Swaption); (ii) 

determine that automatic exercise will 

apply; and/or (iii) take such other action 

as ICC determines to be appropriate to 

permit exercising parties to submit 

exercise notices and to permit ICC to 

assign such notices. The proposed rule 

change would remove ICC’s ability to 

cancel and reschedule the Exercise 

Period under such circumstances and 

renumber the paragraph. This would 

facilitate exercise when there is a 

system’s failure and avoid uncertainty 

that could arise if an Exercise Period is 

rescheduled. 

B. Paragraph 2.8 Automatic Exercise for 

Exercise System Failure 

Currently, if automatic exercise 

applies pursuant to Paragraph 2.6, 

Paragraph 2.8 specifies the parameters 

under which such automatic exercise 

will apply. Under Paragraph 2.8, ICC 

maintains the ability to effect an 

automatic exercise on the expiration 

date on each open position (of all 

exercising parties) in an Index Swaption 

that is determined by ICC to be ‘‘in the 

money’’ on such date. Currently, 

whether an Index Swaption is ‘‘in the 

money’’ is based on the average of the 

end-of-day (‘‘EOD’’) price of the 

underlying CDS contract on the 

preceding business day and on the 

expiration date, and where relevant, 

also based on the average of the EOD 

price on the preceding business day and 


tkelley on DSK125TN23PROD with NOTICES