41776 Federal Register / Vol. 87, No. 133 / Wednesday, July 13, 2022 / Notices 

15 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 Model Validation Framework; 

Exchange Act Release No. 95002 (May 27, 2022); 87 

FR 33851 (June 3, 2022) (File No. SR–ICC–2022– 

006) (‘‘Notice’’). 

4Capitalized terms not otherwise defined herein 

have the meanings assigned to them in the 

Framework or ICC’s Clearing Rules, as applicable. 5Notice, 87 FR at 33851. 

6Notice, 87 FR at 33852. 

7Notice, 87 FR at 33852. 

8The change would clarify, without changing 

ICC’s processes, that the model development 

process is applicable to new Models as well as 

Model Changes. 

submissions should refer to File 

Number SR–NASDAQ–2022–038 and 

should be submitted on or before 

August 3, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–14882 Filed 7–12–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34- 95214; File No. SR–ICC– 

2022–006] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Approving 

Proposed Rule Change Relating to the 

ICC Model Validation Framework 

July 7, 2022. 

I. Introduction 

On May 17, 2022, 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 

thereunder,2 a proposed rule change to 

amend its Model Validation Framework 

(the ‘‘Framework’’). The proposed rule 

change was published for comment in 

the Federal Register on June 3, 2022.3

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 4

A. Background 

The Framework describes the process 

for ICC assuring the effectiveness of its 

models, including changes to existing 

models and the adoption of new 

models. ICC’s processes rely on four 

controls: initial validation; ongoing 

monitoring and validation; 

investigation; and independent periodic 

review. The proposed rule change 

would: (a) expand the scope of the 

Framework to include all of ICC’s 

models; (b) reorganize certain sections 

of the Framework; (c) update and 

strengthen ICC’s requirements regarding 

initial validation, ongoing monitoring 

and validation, and independent 

periodic review; (d) assign additional 

responsibilities under the Framework to 

ICC’s Risk Oversight Officer (‘‘ROO’’); 

and (e) clarify the independence 

requirements for validators. 

B. Scope 

The current Framework applies to 

ICC’s models that make up its risk 

management system, meaning its 

models relating to margin, guaranty 

fund, and liquidity. The proposed rule 

change would expand the scope of the 

Framework so that it applies to all of 

ICC’s models and not just those related 

to its risk management system. The 

proposed rule change therefore would 

define a ‘‘Model’’ as a quantitative 

method, system, or approach that 

applies statistical, economic, financial, 

or mathematical theories, techniques, 

and assumptions to process input data 

into quantitative estimates. This change 

would bring within the scope of the 

Framework ICC’s Model related to 

counterparty credit.5 Thus, after the 

proposed rule change, the Framework 

would apply to all of ICC’s Models, not 

only those related to its risk 

management system. ICC is making this 

change because it determined it was 

beneficial to apply the requirements of 

the Framework to all of its Models, and 

not just those related to its risk 

management system. 

As part of this change, the proposed 

rule change would make two changes to 

the organization of the current 

Framework. First, the current 

Framework begins with an introductory 

section that describes ICC’s risk 

management system and the Models 

that comprise the risk management 

system. Given that, as proposed, the 

Framework would apply to all of ICC’s 

Models and not just those Models that 

are part of its risk management system, 

the proposed rule change would delete 

the current introductory section and 

replace it with a new overview section. 

Instead of describing ICC’s risk 

management system and the 

components of the risk management 

system, the new overview section would 

provide a general description of ICC’s 

Models. The new overview section 

further would define the purpose of the 

Framework as providing assurances that 

ICC’s Models are performing as 

expected, in line with their design 

objectives and business use. 

Second, throughout the Framework, 

the proposed rule change would replace 

references to ICC’s risk management 

system with references to ICC’s Models. 

For example, the current Framework 

classifies changes to ICC’s Models based 

on how the changes affect the risk 

management system’s assessment of 

risk. The proposed rule change instead 

would classify changes based on how 

they affect a Model’s assessment of risk. 

C. Other Organizational Changes 

The proposed rule change would 

make three organizational changes that 

would, in ICC’s view, more 

appropriately position details regarding 

Model controls, Model Change 

materiality, and Model development. 

First, with regard to controls, the 

proposed rule change would move 

information found in current Subsection 

1.3 to a new Subsection 3.1. Current 

Subsection 1.3 provides an overview of 

the four controls used by ICC to assure 

the effectiveness of its Models, 

including changes to existing Models 

and new Models: initial validation; 

ongoing monitoring and validation; 

investigation; and independent periodic 

review. The proposed rule change 

would move the description of these 

controls, including a visual diagram of 

how the controls work together, to a 

new Subsection 3.1. Because Section 3 

of the Framework describes each of the 

four controls in detail, ICC maintains 

that this overview of the controls is 

more appropriate in new Subsection 3.1, 

rather than at the beginning of the 

Framework.6

Second, with regard to materiality, the 

proposed rule change would renumber 

current Subsection 2.2 as new 

Subsection 1.3. New Subsection 1.3 

would be substantively the same as 

current Subsection 2.2 and would 

contain a discussion of how ICC 

classifies proposed changes to its 

Models. ICC classifies Model Changes as 

either Materiality A or Materiality B, 

depending on how substantially the 

proposed change affects a Model’s 

assessment of risk.7

Finally, with regard to development, 

the proposed rule change would move 

to new Subsection 1.4 language 

currently found in Subsection 1.2 

regarding the development of Models 

and Model Change, while maintaining 

the substance of this language.8 Thus, 

under the proposed rule change, as in 

the current Framework, new Model and 


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9Notice, 87 FR at 33852. 

10Notice, 87 FR at 33852. 

11Notice, 87 FR at 33852. 

12Notice, 87 FR at 33852. 

13 ICC stated that in practice ICC would continue 

to ensure that not more than twelve months passes 

between each independent periodic review. Notice, 

87 FR at 33852. 

14 ICC explained in the Notice that this language 

memorializes a current responsibility of the ROO. 

Notice, 87 FR at 33852. 

15Notice, 87 FR at 33852. 

Model Change development includes 

design, implementation, useracceptance testing, and deployment 

phases, and is subject to additional ICC 

governance, as appropriate.9

D. Controls 

As mentioned above, the current 

Framework describes ICC’s process for 

assuring the effectiveness of its Models, 

including Model changes and the 

adoption of new Models, using four 

controls: initial validation; ongoing 

monitoring and validation; 

investigation; and independent periodic 

review. While maintaining the overall 

substance of these four controls, the 

proposed rule change would revise 

certain details relating to how ICC 

carries out the first, second, and fourth 

controls. 

Initial Validation 

The current Framework requires that 

ICC complete an internal initial 

validation for all changes to its Models 

and an independent initial validation 

for Materiality A Model Changes. ICC 

relies on this control to validate the 

conceptual soundness of a change, as 

well as the soundness of the proposed 

approach to ongoing monitoring and 

validation of the change. 

Under the proposed rule change, ICC 

would be required to complete an 

internal initial validation for all changes 

to its Models and an independent initial 

validation for Materiality A Model 

Changes, the same as the current 

Framework. The proposed rule change 

also would require that ICC conduct an 

independent initial validation for all 

new Models, consistent with the 

application of the Framework to all of 

ICC’s Models. As part of this revision, 

the proposed rule change would add the 

term Model or new Model to certain 

provisions that describe the components 

of the independent initial validation. 

Moreover, as part of the independent 

initial validation, the current 

Framework requires a report detailing 

all open items reflecting the 

independent validator’s comments, 

rated using a priority scale. The 

proposed rule change would maintain 

this requirement for a report, but would 

further specify that the report should 

include information describing the work 

performed by the independent validator 

as part of the independent initial 

validation process, including, but not 

limited to, any analysis of or challenges 

to the assumptions of the change to 

existing Model or the new Model. This 

change would memorialize ICC’s 

current practice with respect to these 

reports.10

Ongoing Monitoring and Validation 

The current Framework requires that 

ICC use the second control, ongoing 

monitoring and validation, to assure 

that it has appropriately configured and 

calibrated a Model and any change, and 

to assure that a Model is performing as 

desired. Under the proposed rule 

change, ICC would be required to 

conduct ongoing monitoring and 

validation, the same as in the current 

Framework, but the proposed rule 

change would apply the ongoing 

monitoring and validation to all of ICC’s 

Models, in accordance with the change 

to the scope of the Framework discussed 

above. 

The current Framework describes 

three components of ongoing 

monitoring and validation: parameter 

setting, execution monitoring, and 

outcome analysis. The proposed rule 

change would retain these same three 

components, while revising the 

description of parameter setting and 

outcome analysis as described below. 

The current Framework describes 

parameter setting, which ICC conducts 

pursuant to its Risk Parameter Setting 

and Review Policy. The proposed rule 

change would maintain the current 

description of parameter setting but 

would replace the specific reference to 

the Risk Parameter Setting and Review 

Policy with a general reference to ICC’s 

policies. As described in the Notice, ICC 

is making this change because ICC 

considers such references unnecessary, 

as the Framework is not intended to 

introduce other policies.11

The current Framework describes 

outcome analysis, which involves 

comparing the results of a Model to 

actual or hypothetical outcomes. The 

current Framework explains that ICC 

performs two types of outcome analysis: 

historical back testing and forward 

looking stress testing. The current 

Framework goes on to state that ICC 

describes its back-testing practices in 

the ICC Back-Testing Framework and its 

stress testing practices in the ICC StressTesting Framework. The proposed rule 

change would revise this description to 

note that ICC conducts several types of 

outcome analyses, rather than just two, 

and further would remove the 

references to the ICC Back-Testing 

Framework and the ICC Stress-Testing 

Framework. ICC is making this change 

because ICC in fact performs other 

outcome analysis, in addition to 

historical back testing and forward 

looking stress testing, such as liquidity 

stress testing.12

Independent Periodic Review 

The current Framework describes the 

purpose of the fourth and final control, 

independent periodic review, as 

confirming that a Model or change is 

still fit for purpose, that underlying 

assumptions are still valid, and that ICC 

has performed the ongoing monitoring 

and validation as required in the initial 

validation. The proposed rule change 

would not alter this overall description, 

but would revise aspects of the 

independent periodic review, as 

currently described in the Framework. 

First, the current Framework states 

that ICC’s Chief Risk Officer (‘‘CRO’’) 

provides support and information to 

allow the independent validators to 

perform periodic reviews of all ICC 

Model Components and related practice 

at least every twelve months. The 

proposed rule change would revise this 

language slightly, to state that the CRO 

would provide support and information 

to allow the independent validators to 

perform the periodic reviews of all ICC 

Model Components and related 

practices, in line with the established 

periodicity of review. 

To clarify the periodicity of review, 

the proposed rule change would add 

language explaining that, under 

applicable regulations issued by the 

Commission and the Commodity 

Futures Trading Commission, ICC is 

required to perform independent 

periodic reviews on its Models related 

to financial risk management and 

liquidity risk management on an annual 

basis.13 Moreover, the proposed rule 

change would add language to explain 

that for those Models not subject to 

these regulatory requirements, ICC’s 

ROO, in consultation with the Risk 

Committee, would set an established 

periodicity for independent periodic 

review, and ICC would rely on the date 

of the engagement letter to track the 

requirement.14 ICC noted that currently 

the ROO, as the individual responsible 

for the operation and maintenance of 

the Framework, determines the 

appropriate periodicity of review for 

Models, in consultation with the Risk 

Committee.15

Moreover, the proposed rule change 

would revise the description of the 


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16 ICC stated in the Notice that this change would 

memorialize current practices. Notice, 87 FR at 

33852. 

17Notice, 87 FR at 33852. 

18 ICC explained in the Notice that these changes 

would memorialize current responsibilities of the 

ROO. Notice, 87 FR at 33853. 

components of the independent 

periodic review. The current Framework 

provides that the independent periodic 

review must demonstrate that a Model 

or change is fit for purpose; that its 

underlying assumptions are still valid; 

that ICC has complied with any 

conditions associated with approval of 

the Model or change; and that ICC has 

been complying with its ongoing 

monitoring and validation requirements. 

The proposed rule change would add 

language to note that the third 

component, compliance with any 

conditions associated with the approval 

of the Model or change, may not always 

be applicable. This component would 

not be applicable, for example, if there 

were no open items or conditions 

established during ICC’s approval of the 

Model or change. 

The proposed rule change also would 

revise the description of the report that 

an independent periodic review must 

produce. The current Framework 

requires that an independent periodic 

review produce a report from the 

independent validator providing a 

summary of the completed evaluation 

and details of any remaining open items 

for remediation, classified by priority. 

The proposed rule change would 

maintain this requirement, but would 

further specify that the report should 

include information describing the work 

performed by the independent validator 

as part of the independent periodic 

review process, including, but not 

limited to, any analysis of or challenges 

to the assumptions of the Model.16

The proposed rule change also would 

add language stating that timelines for 

remedial actions would consider any 

applicable governance or regulatory 

actions, or technology implementations, 

and ICC would consult with the Risk 

Committee regarding closure of any 

priority items or observation items, and 

any changes to previously presented 

timeframes. ICC stated in the Notice that 

it is making this change to ensure that 

it remediates high priority items as soon 

as possible and considers any applicable 

governance or regulatory actions or 

technology implementations in 

timelines for remedial actions.17

Finally, the proposed rule change 

would add language to state that ICC, at 

its discretion, could undertake ad hoc 

reviews of methodologies that do not 

meet the definition of a Model under the 

Framework. These methodologies could 

include, for example, third-party or 

vendor-supplied products. The current 

Framework does not contain provisions 

related to ad hoc reviews of third-party 

products. This change would allow ICC 

to apply the Framework to such 

products that could include, for 

example, the ISDA pricing model. 

E. Risk Oversight Officer 

Currently, the ROO is the owner of 

the Framework, and in that role is 

responsible to the ICC President for the 

successful operation and maintenance 

of the Framework. The current 

Framework assigns certain 

responsibilities to the ROO, such as 

maintaining a list of pre-approved 

Independent Model Validators. Under 

the proposed rule change, the ROO 

would remain the owner of the 

Framework and would retain its current 

responsibilities. The proposed rule 

change would specify certain other 

responsibilities for the ROO, in addition 

to these current responsibilities, as 

described below.18

The current Framework requires ICC’s 

CRO to review and determine what 

changes to ICC’s Models qualify as 

Model Changes, and further classify 

such changes as Materiality A or 

Materiality B. The current Framework 

further states that if the ROO and CRO 

cannot reach agreement on a specific 

change, ICC classifies the change as 

Materiality A. Thus, the current 

Framework contemplates the ROO 

having a role in reviewing and 

classifying Model Changes. The 

proposed rule change would make this 

role explicit by requiring that the ROO, 

in addition to the CRO, review and 

determine what changes to ICC’s Models 

qualify as Model Changes, and further 

classify such changes as Materiality A or 

Materiality B. 

The current Framework requires ICC’s 

Risk Department to maintain the ICC 

Model Inventory, which is a central 

repository of key information about all 

ICC Models, their components, and any 

changes to the Models. Under the 

proposed rule change, the ROO, rather 

than the Risk Department, would 

maintain the Model Inventory. In 

addition, the current Framework 

requires the ROO to review the model 

inventory at least quarterly. Under the 

proposed rule change, the ROO also 

would review the model inventory at 

least quarterly, but the ROO would do 

so in conjunction with the Risk 

Department. 

Before implementing a Materiality A 

Model Change, the current Framework 

requires ICC to, among other things, 

complete an independent validation, 

obtain a report of the independent 

validation, and receive no objection to 

the independent validation from the 

Risk Committee. As part of receiving the 

no-objection, the current Framework 

requires that the CRO or its designee 

present the independent validation 

report to the Risk Committee. Under the 

proposed rule change, ROO and CRO (or 

its designee) together would present this 

report to the Risk Committee. 

Similarly, when completing an 

independent periodic review, the 

current Framework requires the 

independent validator to produce a 

report, as described above. The current 

Framework requires that the CRO or its 

designee present the independent 

periodic review report to the Risk 

Committee. Under the proposed rule 

change, ROO and CRO (or its designee) 

together would present this report to the 

Risk Committee. 

Moreover, the proposed rule change 

would assign the ROO an additional 

responsibility with respect to 

independent periodic reviews. As 

discussed above, applicable regulations 

specify how often ICC must review 

certain of its Models. For those Models 

not subject to these regulatory 

requirements, the ROO, in consultation 

with the Risk Committee, would 

establish the periodicity for review. 

Finally, the current Framework 

requires the ROO to maintain a list of 

pre-approved Independent Model 

Validators. The current Framework 

further provides that the CRO or ROO 

can propose new Model Validators to 

add to the list and makes the ROO 

responsible for adding a new Model 

Validator. As part of adding a Model 

Validator, the current Framework 

requires that the ROO provide a written 

summary describing how the proposed 

new Model Validator meets the 

necessary technical expertise and 

independence requirements. Under the 

proposed rule change, the ROO would 

continue to maintain a list of preapproved Independent Model 

Validators, the CRO or ROO would 

propose new Model Validators, and the 

ROO would continue to be responsible 

for adding a new Model Validator. As 

part of adding a new Model Validator, 

the proposed rule change would further 

require that the ROO review resume ́s/ 

CVs of the proposed new Model 

Validator, in addition to providing a 

written summary demonstrating how 

the proposed new Model Validator 

meets the necessary technical expertise 

and independence requirements. 


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19 15 U.S.C. 78s(b)(2)(C). 

20 15 U.S.C. 78q–1(b)(3)(F). 

21 17 CFR 240.17Ad–22(e)(2)(v) and (e)(3)(i). 

22 15 U.S.C. 78q–1(b)(3)(F). 

23 15 U.S.C. 78q–1(b)(3)(F). 

24 17 CFR 240.17Ad–22(e)(2)(v). 

25Notice, 87 FR at 33852. 

26 17 CFR 240.17Ad–22(e)(2)(v). 

F. Independence Requirements 

The current Framework requires that 

independent validators meet certain 

independence and technical expertise 

requirements. The proposed rule change 

would maintain these requirements 

while further specifying that in cases of 

a team of validators, all members must 

meet the independence requirements, 

and ICC will consider members on a 

collective basis when evaluating for 

technical expertise requirements. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization.19 For 

the reasons discussed below, the 

Commission finds that the proposed 

rule change is consistent with Section 

17A(b)(3)(F) of the Act 20 and Rules 

17Ad–22(e)(2)(v) and 17Ad–22(e)(3)(i) 

thereunder.21

A. Consistency With Section 

17A(b)(3)(F) of the Act 

Section 17A(b)(3)(F) of the Act 

requires, among other things, that the 

rules of ICC be designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions.22

Based on its review of the record, and 

for the reasons discussed below, the 

Commission believes the proposed rule 

change is consistent with the promotion 

of the prompt and accurate clearance 

and settlement of securities transactions 

at ICC because it would expand the 

scope of the Framework and improve 

the operation of the Framework. 

With respect to the scope of the 

Framework, as discussed in Part II.B 

above, the proposed rule change would 

apply the Framework to all of ICC’s 

Models. This change would bring into 

the Framework ICC’s Model related to 

counterparty credit and other Models 

that ICC may adopt in the future. The 

Commission believes this change should 

help ICC to maintain the effectiveness of 

its Model related to counterparty 

credit—and any other Models that ICC 

may adopt in the future—by subjecting 

these Models to the Framework’s 

requirements and controls. The 

Commission further believes that having 

an effective counterparty credit Model 

may in turn allow ICC to avoid credit 

losses that could disrupt its ability to 

promptly and accurately clear 

transactions. 

The Commission believes the other 

aspects of the proposed rule change 

discussed above should improve the 

operation of the Framework. For 

example, the Commission believes that 

the changes discussed in Part II.C above 

should help to improve the organization 

and readability of the Framework and 

therefore make it easier to use and 

apply. The Commission further believes 

that memorializing additional 

responsibilities for the ROO, as 

discussed in Part II.E above, should 

clarify these responsibilities and help to 

ensure that ICC personnel, including the 

current ROO and successor ROOs, can 

review, understand, and follow these 

responsibilities. Finally, the 

Commission believes that specifying 

how the independence requirements 

would apply to a team of validators, as 

discussed in Part II.F above, should help 

to ensure a clear and consistent 

application of these requirements to 

such teams. The Commission believes 

these changes, overall, should improve 

the operation of the Framework. 

The Commission also believes that the 

changes discussed in Part II.D above 

should improve the Framework by 

revising certain details with respect to 

the four controls. For example, 

specifying that ICC must conduct an 

independent initial validation for all 

new Models should help to ensure that 

ICC personnel complete such 

validations, consistent with current 

practice. Because independent initial 

validations can identify errors and 

issues, the Commission believes that 

requiring independent initial 

validations for all new Models should 

help to ensure that any new Model is 

effective and well calibrated. Specifying 

that an independent validator’s report 

must describe the work performed by 

the independent validator, including, 

but not limited to, any analysis of or 

challenges to the assumptions of the 

change to existing Model or the new 

Model should help ICC to revise and 

improve such assumptions, as needed. 

Revising the description of parameter 

setting and outcome analysis to remove 

references to other extraneous ICC 

policies would simplify this description 

and help to ensure that it does not 

become out of date due to changes to 

other policies. Finally, the Commission 

believes that the revisions to the 

independent periodic review would 

help to ensure that ICC completes 

validations as required by applicable 

regulations, while making the 

provisions broad enough to encompass 

reviews not covered by applicable 

regulations, including ad hoc reviews of 

methodologies that do not meet the 

definition of a Model. 

For these reasons, the Commission 

believes the proposed rule change 

would expand the scope of the 

Framework and improve the operation 

of the Framework. The Commission 

further believes that because the 

Framework enables ICC to confirm the 

appropriate functioning of its Models, 

expanding the scope and improving the 

operation of the Framework should in 

turn help ICC to maintain effective and 

well-designed Models. Such Models 

may in turn allow ICC to avoid credit 

losses or liquidity shortfalls that could 

disrupt its ability to promptly and 

accurately clear transactions. 

The Commission therefore believes 

that, by improving the Framework, the 

proposed rule change would help to 

ensure the effectiveness of ICC’s models 

and therefore its ability to promptly and 

accurately clear and settle securities 

transactions, consistent with Section 

17A(b)(3)(F) of the Act.23

B. Consistency With Rule 17Ad– 

22(e)(2)(v) 

Rule 17Ad–22(e)(2)(v) requires that 

ICC establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to provide for 

governance arrangements that specify 

clear and direct lines of responsibility.24

As discussed in Part II.E above, the 

proposed rule change would make a 

number of amendments to the 

Framework to memorialize additional 

responsibilities of ICC’s ROO.25 The 

Commission believes that 

memorializing these responsibilities in 

the Framework, as opposed to following 

unwritten practices, is consistent with 

the maintaining written policies and 

procedures designed to provide for clear 

and direct lines or responsibility. The 

Commission believes this is true 

because memorializing these 

responsibilities should help to ensure 

that they can be reviewed, understood, 

and followed by ICC personnel, 

including the current ROO and 

successor ROOs. The Commission 

therefore believes these changes would 

specify clear and direct lines of 

responsibility for the ROO, consistent 

with Rule 17Ad–22(e)(2)(v).26

C. Consistency With Rule 17Ad– 

22(e)(3)(i) 

Rule 17Ad–22(e)(3)(i) requires that 

ICC establish, implement, maintain and 


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27 17 CFR 240.17Ad–22(e)(3)(i). 

28 17 CFR 240.17Ad–22(e)(3)(i). 

29 15 U.S.C. 78q–1(b)(3)(F). 

30 17 CFR 240.17Ad–22(e)(2)(v) and (e)(3)(i). 

31 15 U.S.C. 78s(b)(2). 

32 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 94592 

(April 4, 2022), 87 FR 20905 (April 8, 2022). 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 94947 

(May 19, 2022), 87 FR 31915 (May 25, 2022). The 

Commission designated July 7, 2022, as the date by 

which it should approve, disapprove, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. 

6See Securities Exchange Act Release No. 94989 

(May 26, 2022), 87 FR 33558 (June 2, 2022) 

(‘‘Notice’’). 

7 15 U.S.C. 78s(b)(2)(B). 

8The reference to a registration statement refers 

to a registration statement effective under the 

Securities Act of 1933 (‘‘Securities Act’’). 

9A Direct Listing with a Capital Raise includes 

listings where either: (i) only the company itself is 

selling shares in the opening auction on the first 

day of trading; or (ii) the company is selling shares 

and selling shareholders may also sell shares in 

such opening auction. See Nasdaq Listing Rule IM– 

5315–2. See also Securities Exchange Act Release 

No. 91947 (May 19, 2021), 86 FR 28169 (May 25, 

2021) (order approving rules to permit a Direct 

Listing with a Capital Raise and adopting related 

rules concerning how the opening transaction for 

such listing will be effected) (‘‘2021 Order’’). The 

Exchange’s rules provide for a company listing 

pursuant to a Direct Listing with a Capital Raise to 

list only on the Nasdaq Global Select Market. 

10See Nasdaq Listing Rule IM–5315–2. ‘‘Nasdaq 

Halt Cross’’ means the process for determining the 

price at which Eligible Interest shall be executed at 

the open of trading for a halted security and for 

executing that Eligible Interest. See Nasdaq Rule 

4753(a)(4). ‘‘Eligible Interest’’ means any quotation 

or any order that has been entered into the system 

and designated with a time-in-force that would 

allow the order to be in force at the time of the 

Nasdaq Halt Cross. See Nasdaq Rule 4753(a)(5). 

Pursuant to Nasdaq Rule 4120, the Exchange will 

halt trading in a security that is the subject of an 

initial public offering (or direct listing), and 

terminate that halt when the Exchange releases the 

security for trading upon certain conditions being 

met, as discussed further below. See Nasdaq Rule 

4120(a)(7) and (c)(8). 

11The Exchange states that references in the 

proposal to the price range established by the issuer 

in its effective registration statement refer to the 

price range disclosed in the prospectus in such 

effective registration statement. See Notice, supra 

enforce written policies and procedures 

reasonably designed to, as applicable, 

maintain a sound risk management 

framework for comprehensively 

managing legal, credit, liquidity, 

operational, general business, 

investment, custody, and other risks 

that arise in or are borne by ICC, which, 

among other things, includes risk 

management policies, procedures, and 

systems designed to identify, measure, 

monitor, and manage the range of risks 

that arise in or are borne by ICC, that are 

subject to review on a periodic basis and 

approved by the board of directors 

annually.27 As discussed above, the 

proposed rule change would expand the 

scope of the Framework so that it 

applies consistently across all of ICC’s 

Models and not just those related to its 

risk management system. For example, 

bringing within the scope of the 

Framework ICC’s Model related to 

counterparty credit. Moreover, under 

the revised Framework, ICC would 

review this Model on a periodic basis. 

The Commission further believes that 

this Model helps ICC manage a risk 

borne by ICC, the risk created by credit 

exposures to ICC’s counterparties. The 

Commission therefore believes this 

change should help ensure that ICC 

reviews on a periodic basis a policy that 

ICC uses to identify, measure, monitor, 

and manage a risk borne by ICC, 

consistent with Rule 17Ad–22(e)(3)(i).28

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, and in 

particular, with the requirements of 

Section 17A(b)(3)(F) of the Act 29 and 

Rules 17Ad–22(e)(2)(v) and 17Ad– 

22(e)(3)(i) thereunder.30

It is therefore ordered pursuant to 

Section 19(b)(2) of the Act 31 that the 

proposed rule change (SR–ICC–2022– 

006), be, and hereby is, approved.32

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–14888 Filed 7–12–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–95220; File No. SR– 

NASDAQ–2022–027] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Instituting Proceedings To Determine 

Whether To Approve or Disapprove a 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Modify Certain 

Pricing Limitations for Companies 

Listing in Connection With a Direct 

Listing With a Capital Raise 

July 7, 2022 

I. Introduction 

On March 21, 2022, The Nasdaq Stock 

Market LLC (‘‘Nasdaq’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to modify certain pricing 

limitations for companies listing in 

connection with a direct listing with a 

primary offering in which the company 

will sell shares itself in the opening 

auction on the first day of trading on the 

Exchange. The proposed rule change 

was published for comment in the 

Federal Register on April 8, 2022.3 On 

May 19, 2022, pursuant to Section 

19(b)(2) of the Exchange Act,4 the 

Commission designated a longer period 

within which to either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On May 23, 2022, the Exchange filed 

Amendment No. 1 to the proposed rule 

change, which superseded the proposed 

rule change as originally filed. 

Amendment No. 1 was published for 

comment in the Federal Register on 

June 2, 2022.6 The Commission has 

received no comments on the proposal. 

This order institutes proceedings under 

Section 19(b)(2)(B) of the Exchange Act 7

to determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1. 

II. Description of the Proposal 

Nasdaq Listing Rule IM–5315–2 

provides listing requirements for 

Nasdaq’s Global Select Market for a 

company that has not previously had its 

common equity securities registered 

under the Exchange Act to list its 

common equity securities on the 

Exchange at the time of effectiveness of 

a registration statement 8 pursuant to 

which the company will sell shares 

itself in the opening auction on the first 

day of trading on the Exchange (a 

‘‘Direct Listing with a Capital Raise’’).9

Securities qualified for listing under 

Nasdaq Listing Rule IM–5315–2 must 

begin trading on the Exchange following 

the initial pricing through the 

mechanism outlined in Nasdaq Rule 

4120(c)(9) and Nasdaq Rule 4753 for the 

opening auction, otherwise known as 

the Nasdaq Halt Cross.10 Currently, in 

the case of a Direct Listing with a 

Capital Raise, the Exchange will release 

the security for trading on the first day 

of listing if, among other things, the 

actual price calculated by the Nasdaq 

Halt Cross is at or above the lowest price 

and at or below the highest price of the 

price range established by the issuer in 

its effective registration statement 11 (the 

‘‘Pricing Range Limitation’’). 


jspears on DSK121TN23PROD with NOTICES1