Maria Alarcon

Manager, Legal

July 6, 2022

Re: Updates to Stress Testing Framework and 

Liquidity Risk Management Framework

Pursuant to Section 5c(c)(1) of the 

Commodity Exchange Act and Commission 

Regulation 40.6(a)

VIA ELECTRONIC PORTAL

Mr. Christopher Kirkpatrick

Secretary

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, D.C. 20581

Dear Mr. Kirkpatrick:

ICE Clear Credit LLC (“ICC”) hereby submits, pursuant to Section 5c(c)(1) of the Commodity Exchange Act 

(the “Act”) and Commodity Futures Trading Commission (“Commission”) Regulation 40.6(a), a selfcertification of changes to the Stress Testing Framework (“STF”) and the Liquidity Risk Management 

Framework (“LRMF”). ICC is registered with the Commission as a derivatives clearing organization (“DCO”). 

ICC intends to implement the changes no sooner than the tenth business day following the filing of this 

submission with the Commission at its Washington, D.C. headquarters and with its Chicago regional office.

ICC proposes to amend the STF and LRMF to introduce new stress scenarios, clarify existing stress 

scenarios, and make other minor edits. This submission includes a description of the changes to the STF 

and LRMF. Certification of the changes pursuant to Section 5c(c)(1) of the Act and Commission Regulation 

40.6(a) is also provided below. 

I. STF

The proposed amendments to the STF introduce new stress scenarios related to the Coronavirus pandemic 

and oil price war (the “COVID-19/Oil Crisis”), clarify existing stress scenarios related to credit default index 

swaptions (“index options”), and make other minor edits. 

The proposed changes amend Section 5.1 containing the historically observed extreme but plausible 

market scenarios. ICC proposes a minor edit to abbreviate a term. ICC proposes to introduce additional 

stress scenarios related to the COVID-19/Oil Crisis. ICC previously introduced price-based stress scenarios 

related to the COVID-19/Oil Crisis in the STF, which replicate observed instrument price changes during 

this period.1ICC proposes to incorporate complementing spread-based stress scenarios related to the 

COVID-19/Oil Crisis, which reflect observed relative spread increases and decreases during this period 

(the “COVID-19/Oil Crisis Spread Scenarios”). Additionally, the stress scenarios related to index options 

(i.e., the stress options-implied Mean Absolute Deviation (“MAD”) scenarios) would be moved into a 

separate section and corresponding references throughout the STF would accordingly refer to this new 

Section 9. 

1 See Submission Number 2007-1014-1830-99, dated July 10, 2020, for additional information on 

the introduction of the COVID-19/Oil Crisis price-based stress scenarios.
ICC proposes additional clarifications in Section 5 and throughout the STF. To distinguish from the COVID19/Oil Crisis Spread Scenarios, ICC would refer to the price-based stress scenarios as the COVID-19/Oil 

Crisis Price Scenarios in Section 5.2 and throughout the STF. ICC also proposes to incorporate the COVID19/Oil Crisis Spread Scenarios in the other categories of scenarios, namely in Section 5.3 (hypothetically 

constructed (forward looking) extreme but plausible market scenarios) and Section 5.4 (extreme model 

response test scenarios), as well as in Section 14 (interpretation of results). 

ICC proposes further details to describe how the existing stress scenarios for index option positions are 

integrated within the current set of stress scenarios for CDS index and single name instruments. Currently, 

the stress options-implied MAD scenarios are generated for index option positions. Such scenarios are not 

applied to portfolios independently but rather directly incorporated into the CDS stress scenarios. As such, 

the proposed changes clarify that the stress options-implied MAD scenarios complement the underlying 

stress scenarios (in Section 6) and reference proposed Section 9 for more detail on the stress optionsimplied MAD approach (in Section 8). 

Moreover, proposed Section 9 memorializes the stress options-implied MAD scenarios and approach more 

clearly. Information from Section 5.1 on these scenarios would reside in Section 9 with certain amendments. 

The proposed amendments do not change the stress testing methodology and instead add detail and 

update terminology to be clearer. Proposed language explains that when index options are present in a 

portfolio, the underlying market stress test scenarios incorporate the stress options-implied MAD scenarios. 

Terminology changes specify that the scenarios consider an increase/decrease in the options-implied MAD 

upon spread widening/tightening and clarification changes detail the incorporation of the options-implied 

MAD in the scenarios. The proposed changes more clearly set forth the creation of the stress optionsimplied MAD, including how the necessary components are derived. No changes are proposed with respect 

to what the final scenario prices of the index option instruments reflect. The following sections are 

renumbered accordingly throughout the STF, including in Table 1 in Section 14. Finally, proposed Section 

17 adds a revision history to track changes.

II. LRMF 

ICC proposes corresponding changes to the LRMF to introduce new stress scenarios related to the COVID19/Oil Crisis, clarify existing stress scenarios related to index options, and make other minor edits. 

ICC proposes to revise Section 2.3 regarding liquidity requirements for client-related accounts. The 

amended language specifies that Clearing Participants deposit 100% of their Euro denominated client gross 

margin in any acceptable collateral to match Schedule 401 in the ICC Rules. This is intended to be a cleanup change to remove an outdated provision to ensure consistency across the LRMF and ICC Rules and 

would not change current requirements. 

ICC proposes updates to Section 3.3.2 regarding the historically observed extreme but plausible market 

scenarios. The proposed changes define extreme market events to include COVID-19 and the 

simultaneous occurrence of the oil price war and make grammatical edits to change a term to its plural 

form. ICC also previously introduced the COVID-19/Oil Crisis price-based stress scenarios in the LRMF2

and proposes to incorporate the complementing COVID-19/Oil Crisis Spread Scenarios, which are also 

referred to as the COVID19OCSS, in the LRMF. The price-based stress scenarios would be referred to as 

the COVID-19/Oil Crisis Price Scenarios or COVID19OCPS throughout the document. 

Revisions to the existing stress options-implied MAD scenarios are proposed in Section 3.3.2. To ensure 

consistency with the STF, ICC proposes the inclusion of similar language and changes in subsection (b). 

The proposed changes memorialize the stress options-implied MAD scenarios and approach more clearly 

2

Id.
in the LRMF, including how the scenarios for index option positions are integrated within the current set of 

stress scenarios for CDS index and single name instruments. The proposed amendments do not change 

the methodology and instead add detail and update terminology to be clearer. Terminology changes specify 

that the scenarios consider an increase/decrease in the options-implied MAD and clarification changes 

detail the incorporation of the options-implied MAD in the scenarios. The proposed changes more clearly 

set forth the creation of the stress options-implied MAD, including how the necessary components are 

derived. No changes are proposed with respect to what the final scenario prices of the index option 

instruments reflect. A typographical fix is made in the footnotes to refer to the correct reference document. 

In addition, ICC proposes to amend subsection (d) to add a section symbol and to set out how the stress 

options-implied MAD scenarios that complement the extreme model response test scenarios are derived 

to match language currently in the STF. 

ICC proposes additional minor updates to Section 3.3. ICC would incorporate the COVID-19/Oil Crisis 

Spread Scenarios in Section 3.3.3 in Table 1 containing the liquidity stress testing scenarios and in Section 

3.3.4 related to the interpretation of results. ICC also proposes a minor edit to the extreme market scenarios 

in Table 1 to specify that the COVID19OCPS are extreme. 

Core Principle Review:

ICC reviewed the DCO core principles (“Core Principles”) as set forth in the Act. During this review, ICC 

identified the following Core Principles as being impacted:

Financial Resources: The changes to the STF and LRMF are consistent with the financial resources

requirements of Core Principle B and Commission Regulation 39.33. The introduction of the COVID-19/Oil 

Crisis Spread Scenarios would complement the current scenarios. Additional proposed changes ensure 

consistency across the STF and LRMF and more clearly describe the stress options-implied MAD 

scenarios. The amendments would thus support ICC’s ability to maintain its financial resources and 

withstand the pressures of defaults, consistent with the financial resources requirements of Core Principle 

B and Commission Regulation 39.33.

Risk Management: The changes to the STF and LRMF are consistent with the risk management 

requirements of Core Principle D and Commission Regulations 39.13 and 39.36. The changes introduce

spread-based COVID-19/Oil Crisis scenarios that complement the current scenarios and memorialize the 

stress options-implied MAD scenarios more clearly to ensure transparency. The additional clarification and 

clean-up changes further ensure readability and clarity. ICC believes that having policies and procedures 

that clearly and accurately document its risk management practices, including stress testing and liquidity 

stress testing, are an important component to the effectiveness of ICC’s risk management system. The

amendments continue to ensure that ICC possesses the ability to manage the risks associated with 

discharging its responsibilities, consistent with the risk management requirements of Core Principle D. 

ICC’s risk management practices will also continue to be performed in accordance with the standards and 

practices set forth in Commission Regulations 39.13 and 39.36.

Amended Rules:

The proposed changes consist of amendments to the STF and LRMF. ICC has respectfully requested 

confidential treatment for the STF and LRMF, which were submitted concurrently with this self-certification 

submission.

Certifications:

ICC hereby certifies that the changes to the STF and LRMF comply with the Act and the regulations 

thereunder. There were no substantive opposing views to the changes.
ICC further certifies that, concurrent with this filing, a copy of the submission was posted on ICC’s website, 

and may be accessed at: https://www.theice.com/clear-credit/regulation.

ICC would be pleased to respond to any questions the Commission or the staff may have regarding this 

submission. Please direct any questions or requests for information to the attention of the undersigned at 

(312) 836-6854.

Sincerely,

Maria Alarcon

Manager, Legal