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ICE Clear Europe Limited

Registered in England No.06219884

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA

September 13, 2023

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

Re: ICE Clear Europe Self-Certification Pursuant to Commission Rule Rule 40.6 

– Model Risk Policy Amendments

Dear Mr. Kirkpatrick:

ICE Clear Europe Limited (“ICE Clear Europe” or the “Clearing House”), a registered 

derivatives clearing organization under the Commodity Exchange Act, as amended (the 

“Act”), hereby submits to the Commodity Futures Trading Commission (the 

“Commission”), pursuant to Commission Rule 40.6 for self-certification, amendments 

to its Model Risk Governance Framework (to be renamed the Model Risk Policy) (the 

“Model Risk Policy” or the “Policy”) to make certain enhancements to the Clearing 

House’s current policy and practices as they pertain to model and parameter risks.1 The 

amendments will become effective on the first business day following the tenth business 

day after submission, or such later date as ICE Clear Europe may determine. 

Concise Explanation and Analysis

ICE Clear Europe is amending its Model Risk Governance Framework (to be renamed 

the Model Risk Policy) to expand its current scope to include certain risk frameworks 

and to distinguish between “Business As Usual” (“BAU”) and non-BAU parameter 

changes, among other changes discussed herein.

1 Capitalized terms used but not defined herein have the meanings specified in the Model Risk Policy

or, if not defined therein, the ICE Clear Europe Clearing Rules. 
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ICE Clear Europe Limited

Registered in England No.06219884

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA

The amendments will expand the scope of the Policy to include risk frameworks used 

to quantify, aggregate and manage the risks of the Clearing House. The amendments 

will further clarify that references to “model” in the rest of the document will refer to 

both models and risk frameworks. The discussion of the architecture supporting the 

Policy will be revised to also include guidelines for the remediation of validation 

findings relating to models. 

The amendments will also state that changes to risk parameters will be categorized as 

significant and not significant. This will follow the same categorization under the 

existing Policy with respect to model changes. A footnote referencing a specific ESMA 

opinion as providing the criteria defining model change significance will be revised to 

state more generally that the criteria will be in accordance with prevailing regulatory 

opinions, guidelines or requirements (in order to take into account any other regulatory 

positions that may be in effect from time to time). Moreover, the changes to parameters 

will be categorized as Business as Usual (“BAU”) and Non-BAU. Changes considered 

BAU will be defined as changes in the parameters resulting from the application of 

existing methodologies as part of a regular review or calibration exercise. Non-BAU 

changes will be all other changes. The amendments will clarify that the definition of 

BAU will be in accordance with existing regulatory guidelines. 

The amendments will also clarify certain governance responsibilities. The Board will

be responsible for the approval of significant non-BAU changes to risk parameters. 

Auto Pilot versus Production deviations beyond BAU thresholds will generally follow 

a similar governance process to that for changes in parameters but given that these 

deviations are usually time sensitive and driven by stressed market conditions, the 

Clearing House will need the ability to act quickly to ensure market stability. Thus, for 

these situations the governance process will involve Board notification rather than 

Board pre-approval and Risk Oversight Department review rather than full independent 

pre-validation. The Model Oversight Committee will be responsible for establishing 

and maintaining a model inventory and assigning a specific owner to each model (a 

function currently performed by the First Line). The Model Oversight Committee will

also be responsible for approving non-significant non-BAU changes to risk parameters 

and for reviewing significant non-BAU changes to risk parameters for recommendation 

to the Board. In addition, the committee will be responsible for approving changes to 

model documentation. 

The First Line responsibilities will also be modified by the amendments. As noted 

above, the First Line will no longer be responsible for establishing and maintaining a 

model inventory and assigning a specific owner to each model as that responsibility 

will be moved to the Model Oversight Committee. The First Line will be responsible 

for proposing and seeking approval for non-BAU changes to risk parameters (as it 

currently does for models, model changes, and model retirements). Similarly, the First 

Line will also be responsible for proposing significance levels for non-BAU changes to 

risk parameters. The Second Line will be responsible for performing independent 

validation exercises for non-BAU changes to risk parameters (as it currently does for 

models). 

Finally, a new sub-section will be added addressing Non-BAU parameter changes. The 

section will provide that significant non-BAU changes to risk parameters must be 
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ICE Clear Europe Limited

Registered in England No.06219884

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA

validated before they are implemented in production. Non-significant non-BAU 

changes must be validated in accordance with the validation pipeline. 

A number of other drafting clarifications and conforming changes replacing the 

references to “Framework” with “Policy” will also be made throughout the document.

Compliance with the Act and CFTC Regulations

The amendments to the Model Risk Policy are potentially relevant to the following core 

principles: (D) Risk Management and (O) Governance, and the applicable regulations 

of the Commission thereunder.

• Risk Management. As stated above, the amendments to the Model Risk Policy 

are designed to facilitate the risk management and governance of risk 

frameworks in a similar manner to that for models under the existing Policy.

The processes, controls and escalations currently used by the Clearing House 

with respect to the testing and reviewing of models, as well the responsibilities 

of the Clearing House’s committees, management and the Board in relation to 

the models, will be applied to risk frameworks. Furthermore, the amendments 

to the Policy will better distinguish between BAU and non-BAU changes

(which are subject to additional review and governance requirements). The 

expanded scope of the Policy will, in ICE Clear Europe’s view, assist the 

Clearing House in the ongoing review and oversight of the models and risk 

frameworks it uses in the operation of the Clearing House, and the 

management of the risks that may arise from the use of such models and 

frameworks. (ICE Clear Europe further notes that the amendments do not 

otherwise change ICE Clear Europe’s model validation cycles.) The 

amendments thus enhance the Clearing House’s overall risk management, 

consistent with the requirements of Core Principle D and CFTC Rule 39.13.

• Governance. As discussed, the amendments to the Policy would extend the 

existing responsibilities of the Clearing House’s committees, management and 

the Board with respect to models to also apply to risk frameworks. The 

amendments would also clarify certain responsibilities of the Board and other 

relevant committees and personnel as they relate to BAU and Non-BAU 

changes to risk parameters. In ICE Clear Europe’s view, the amendments are 

therefore consistent with the requirements of Core Principle O and CFTC Rule 

39.24.

As set forth herein, the amendments consist of the amendments to the Model Risk 

Policy. ICE Clear Europe has requested confidential treatment with respect to the 

amendments, which have been submitted concurrently with this self-certification 

submission.

ICE Clear Europe hereby certifies that the amendments comply with the Act and the 

Commission’s regulations thereunder. 
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ICE Clear Europe Limited

Registered in England No.06219884

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA

ICE Clear Europe received no substantive opposing views in relation to the 

amendments.

ICE Clear Europe has posted a notice of pending certification and a copy of this 

submission on its website concurrent with the filing of this submission. 

If you or your staff should have any questions or comments or require further 

information regarding this submission, please do not hesitate to contact the undersigned 

at George.milton@theice.com or +44 20 7429 4564. 

Very truly yours,

George Milton

Head of Regulation & Compliance