Olivia Bazor

Staff Attorney

 August 24, 2023

Re: Updates to Stress Testing 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 ICC Stress Testing Framework (“STF”). 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 revising the STF which sets forth ICC’s stress testing practices that are focused on ensuring 

the adequacy of systemic risk protections. The proposed changes are limited to updating the stress period 

of the default-free Euro discount interest rate curve used in ICC’s interest rate sensitivity analysis and 

providing additional clarifying language to the STF. Certification of the changes pursuant to Section 

5c(c)(1) of the Act and Commission Regulation 40.6(a) is also provided below.

ICC proposes to update STF Section 11, “Interest Rate Sensitivity Analysis”, which describes ICC’s interest 

rate sensitivity analysis to account for the risks associated with changes to default-free discount interest 

rates. The STF currently incorporates two, currency specific, stress test parallel shifts (i.e., up, and down) 

of the default-free discount interest rate for both CDS and CDS Index Options instruments. The magnitude 

of the interest rate stress scenarios reflects the largest shock, estimated using the collateral haircut model, 

during a selected stress period for the applicable sovereign debt, and such selected stress periods are subject 

to periodic review. Following such review, ICC proposes to update the stress period used to shock the Euro 

default-free discount interest rate.

The reasoning behind such proposed change is to respond to the current volatile interest rate period which 

began in 2022 and continues into 2023 due to the fast pace of U.S. Dollar and Euro interest rate increases. 

The impact to Euro interest rate volatility has been significant due to the sudden and rapid increases in Euro 

interest rates by the European Central Bank in an effort to curb multi-decade high inflation. Such interest 

rate volatility observed during this currently ongoing “2022/2023 inflation crisis period” is greater than the 

interest rate volatility observed in the Euro stress period currently in place in the STF (i.e., the “western 

European credit crisis period” which occurred in 2011-2012). Specifically, the magnitude of the collateral 
haircuts observed in the currently ongoing “2022/2023 inflation crisis period” exceed the collateral haircuts 

observed during the “western European credit crisis period.” 

Therefore, ICC proposes to replace the current “western European credit crisis period” stress period with 

the “2022/2023 inflation crisis period” stress period in Section 11 of the STF. Such proposed change is 

prudent, from a risk perspective, as it improves ICC’s interest rate sensitivity analysis by referencing the 

higher interest rate volatility stress period. As the current inflation crisis remains ongoing, ICC will continue 

to monitor interest rate volatility for any new volatility peak observed in the current “2022/2023 inflation 

crisis period.” In addition, ICC proposes to make analogous clarifying language changes to the 

identification of the default-free USD discount interest rate curve in Section 11 of the STF to remove the 

specific dates of the applicable stress period (i.e., the 2008/2009 credit crisis period). 

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 are consistent with the financial resources requirements of 

Core Principle B and Commission Regulation 39.33. The proposed changes to the STF update the stress 

period of the default-free Euro discount interest rate curve used in ICC’s interest rate sensitivity analysis to

reflect the interest rate shocks observed during the current 2022-2023 inflation crisis period. Such proposed 

changes improve ICC's interest rate sensitivity analysis by referencing the higher interest rate volatility 

stress period. The updates would thus support ICC’s ability to maintain its financial resources and withstand 

the pressures of defaults, consistent with the financial resource’s requirements of Core Principle B and 

Commission Regulation 39.33.

Risk Management: The changes to the STF are consistent with the risk management requirements of Core 

Principle D and the risk management requirements set forth in Commission Regulations 39.13 and 39.36. 

The changes strengthen the STF by updating the referenced stress period of the Euro interest rate curve 

which improves ICC’s interest rate sensitivity analysis. Such changes ensure the STF remains current to 

take into account the high interest rate volatility observed during the current 2022-2023 inflation crisis 

period. ICC believes that having policies and procedures that are current, and clearly and accurately 

document its risk management practices, including stress testing are an important component to the 

effectiveness of ICC’s risk management system. The updates 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 revisions to the STF. ICC has respectfully requested confidential treatment 

for the STF which was submitted concurrently with this self-certification submission.

Certifications:

ICC hereby certifies that the changes to the STF 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 

904-855-5580.

Sincerely,

Olivia Bazor

Staff Attorney