Document ID: SEC-2023-0858-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Credit, LLC
Posted Date: 2023-08-10T04:00Z

[Federal Register Volume 88, Number 153 (Thursday, August 10, 2023)]
[Notices]
[Pages 54370-54373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17102]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98055; File No. SR-ICC-2023-007]

Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Recovery Plan and 
the ICC Wind-Down Plan

August 4, 2023.

I. Introduction

    On June 5, 2023, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend its 
Recovery Plan and Wind-Down Plan. The proposed rule change was 
published for comment in the Federal Register on June 22, 2023.\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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Proposed Rule Change Relating to the ICC Recovery Plan and the 
ICC Wind-Down Plan; Exchange Act Release No. 97734 (June 15, 2023), 
88 FR 40874 (June 22, 2023) (File No. SR-ICC-2023-007) (``Notice'').
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II. Description of the Proposed Rule Change

A. Background

    ICC is registered with the Commission as a clearing agency for the 
purpose of clearing CDS contracts.\4\ The proposed rule change would 
amend both the Recovery Plan and the Wind-Down Plan, which serve as 
plans for the recovery and orderly wind-down of ICC, respectively, if 
such recovery or wind-down is necessitated by credit losses, liquidity 
shortfalls, losses from general business risk, or any other losses 
incurred by ICC. The Recovery Plan is designed to establish ICC's 
actions to maintain its viability as a going concern by addressing any 
uncovered credit loss, liquidity shortfall, capital inadequacy, or 
business, operational or other structural weakness that threatens ICC's 
viability as a going concern. The Wind-Down Plan is designed to 
establish how ICC could be wound down in an orderly manner in the event 
that it cannot continue as a going concern.
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    \4\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in ICC's Clearing Rules.
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B. Recovery Plan

    ICC proposes general updates and edits to its Recovery Plan to 
promote clarity and to ensure that the information in it is current. 
The proposed amendments to the Recovery Plan reflect and relate to 
changes that impacted ICC in the past year. To that end, the current 
Recovery Plan includes in the introduction a disclaimer that, unless 
otherwise specified, all information provided in the plan is current as 
of December 31, 2021. The proposed rule change would update that date 
to December 31, 2022. The proposed amendments to the Recovery Plan also 
would include changes to the coverage amount under the ICC clearing 
participant (``CP'') default insurance policy (``CP Default Insurance 
Policy''), and the addition of ICC-specific procedures for financial 
resource calculations.
    Section IV covers key recovery elements. Within this section, the 
proposed rule change would amend clearing participation (IV.B), 
management and governance (IV.C), and key performance metrics (IV.D). 
In Section IV.B, ICC would create a reference to a membership category, 
Associate Clearing Participant. In Section IV.C, ICC would make a 
correction to the Management/Governance chart to indicate that the 
business continuity plan (``BCP'') and disaster recovery (``DR'') 
Oversight Committee is not a sub-committee of the ICC Audit Committee. 
In Section IV.C, ICC would update the description of ICE Holding Board 
Chairman Vincent Tese, who is currently listed as an independent 
director of both ICE Holding and ICE Inc. The proposed rule change 
would amend the description to remove his listing as an independent 
director of Ice Inc. In Section IV.D, ICC would update its revenues, 
volumes, and expenses for years 2021 and 2022.
    The proposed rule change also would amend Section VI of the 
Recovery Plan, which covers interconnections and interdependencies. 
Specifically, ICC proposes to amend Sections VI.A

[[Page 54371]]

(Operational), VI.B (Financial), and VI.C (Contractual Agreements). The 
proposed updates to Section VI.A would reflect changes in the last year 
and would update the descriptions of ICC's personnel and facilities, as 
well as its in-house systems. Section VI.B currently includes a 
``Counterparty Chart'' that lists all of ICC's various counterparties 
and indicates which function(s) each counterparty performs (i.e., 
Clearing Participant, Custodian, Depository, etc.) would update the 
roles in its counterparty chart. The proposed changes to Section VI.B 
would update that chart to reflect changes to the functions performed 
by certain counterparties. The only proposed update to Section VI.C 
would be to the chart of counterparty contractual agreements in that 
section. Specifically, ICC would remove the reference to a service no 
longer received from a specific external service provider (i.e., 
receipt of market data to value FX positions and collateral).
    The proposed rule change would make several updates to Section VIII 
of the Recovery Plan, which addresses ICC's recovery tools, primarily 
in Section VIII.B. First, the proposed rule change would update the 
name of the carrier for ICC's CP Default Insurance Policy, which is 
maintained at the ICE Group level and may be used as a recovery tool in 
a CP default scenario pursuant to ICC's Rules, provided certain 
conditions are met. Second, it would amend the amount of coverage to 
reflect that the Policy coverage amount has increased to $75 million 
(from $50 million, as reflected in the current Recovery Plan); third, 
it would update the points of contact for ICC's Default Insurance 
Policy; and fourth, it would update the coverage amount under the 
Professional Liability/Cyber (E&O) Insurance Policy from $110 million 
to $120 million to reflect that coverage amount under that policy has 
increased since the last update to the Recovery Plan. Fifth, in Section 
VIII.B.1.iii (Direct Infusion of Cash to ICC from Parent/ICE Group), 
ICC would update the current description of ICC's, ICE Inc's, and ICE 
Group's respective year-end cash balances to reflect their most current 
consolidated balance sheets. Finally, the proposed rule change would 
add a footnote in Section VIII.B that references and describes ICC's 
Risk Appetite Statements and Metrics, which define the thresholds ICC 
has established with respect to regulatory capital requirements and 
provide for alerts in the event that ICC is nearing a breach of these 
amounts (i.e., the current alert is triggered if ICC maintains 110% or 
less of its required regulatory capital). The reference to and 
description of ICC's Risk Appetite Statements and Metrics is intended 
to provide further details on how decreases in ICC's regulatory capital 
will trigger escalation within ICC, which in turn may lead to potential 
remedial actions, including whether ICC should initiate its plan to 
raise additional equity.
    Section X of the Recovery Plan identifies ICC's Financial Resources 
for Recovery. The proposed rule change would add details regarding the 
calculation of ICC's financial resources available for recovery to 
reflect new ICC-specific Financial Resource Calculation Procedures that 
ICC has added since the last update to the Recovery Plan. Specifically, 
the Recovery Plan would specify that ICC completes a voluntary annual 
calculation of regulatory requirements under European Market 
Infrastructure Regulation (``EMIR'') guidelines. It would note that 
ICC's calculation approximates the EMIR requirements and is calculated 
by ICE Treasury on an annual basis upon the finalization of ICC's 
statutory audit and financial statements, as well as a discussion of 
future expectations with the ICC Treasury Director, and specify that 
the EMIR Estimate includes four elements relating to: winding down/
restructuring; operational and legal risks; credit and counterparty 
risk/market risk; and business risks. The proposed update would also 
include a reference to the Financial Resource Calculation Procedures 
and note that the procedures include additional details regarding the 
calculation of regulatory capital requirements under EMIR guidelines. 
The proposed rule change also would amend Section X to update the 
expected costs of recovery and wind-down, including expenses related to 
legal services, consulting, operations, regulatory capital 
requirements, and other wind down costs.
    Section XI of the Recovery Plan (Financial Information) provides 
the balance sheet and income statement for ICC and the consolidated 
balance sheet and income statement for ICE Inc. and its subsidiaries. 
The proposed rule change would update the financial information in this 
section to reflect the most current financial statements for both 
entities.
    The proposed rule change would make minor edits to Section XIII, 
Appendix G, which covers form default insurance proof of loss, by 
updating the carrier and policy number for ICC's CP Default Insurance 
Policy. In Section XIV, which contains the index of exhibits, the 
proposed rule change would update the index of exhibits with the 
current versions of policies and procedures, consistent with updated 
footnote references. Finally, the proposed rule change would make non-
substantive typographical fixes in the ICC Recovery Plan, as well as 
conforming changes in the ICC Wind-Down Plan, including updates to 
entity names, and grammatical and formatting changes.

C. Wind-Down Plan

    ICC proposes updates and edits to promote clarity and to ensure 
that the information provided in the Wind-Down Plan is current. The 
proposed rule change reflects and relates to changes that have impacted 
ICC in the past year, including the addition of ICC-specific procedures 
for financial resource calculations. The current Wind-Down Plan 
includes in the introduction a disclaimer that, unless otherwise 
specified, all information provided in the plan is current as of 
December 31, 2021. The proposed rule change would update that date to 
December 31, 2022.
    Section II of the Wind-Down Plan is an overview of the structure of 
ICC. Section II.A addresses ownership of ICC. The proposed rule change 
would add additional language for the headquarter location for ICC. 
Section IV addresses membership and ICC governance. The proposed rule 
change would amend the Management and Governance chart in Section IV.B 
because the previous chart incorrectly indicated that the BCP and DR 
Oversight Committee are sub-committees of the ICC Audit Committee. 
Additionally, the proposed rule change would update the description of 
Vincent Tese in Section IV.B, so that he is listed as just an 
independent director of ICC, but is no longer listed as an independent 
director of ICE Inc.
    In the beginning of Section VII, which addresses interconnections 
and interdependencies, the proposed rule change would update ICC 
revenue. Later in VII.C.2, the proposed rule change would update the 
number of personnel and facilities. In Section VII.C, which addresses 
operational services, the proposed rule change would update a list of 
in-house systems. Section VII.D addresses financial services and the 
proposed rule change would update the roles on its counterparty chart.
    Section IX addresses financial resources to support wind-down. In 
this section, the proposed rule change would include additional details 
regarding the calculation of ICC's financial resources available for 
wind-down to reflect the new ICC-specific Financial Resource

[[Page 54372]]

Calculation Procedures. The proposed rule change would add details 
regarding the calculation of regulatory capital requirements under EMIR 
guidelines. Similar to the proposed changes in the Recovery Plan, the 
proposed rule change would specify that calculations are performed by 
ICE Treasury on an annual basis upon the finalization of ICC's 
statutory audit and financial statements and include a discussion of 
future expectations with the ICC Treasury Director. Similar to the 
proposed changes in the Recovery Plan, the proposed rule change would 
note that ICC's calculation approximates the EMIR requirements and is 
calculated by ICE Treasury on an annual basis upon the finalization of 
ICC's statutory audit and financial statements, as well as a discussion 
of future expectations with the ICC Treasury Director, and specify that 
the EMIR Estimate includes four elements relating to: winding down/
restructuring; operational and legal risks; credit and counterparty 
risk/market risk; and business risks. The proposed update would also 
include a reference to the Financial Resource Calculation Procedures 
and note that the procedures include additional details regarding the 
calculation of regulatory capital requirements under EMIR guidelines.
    The proposed rule change would update and edit to promote clarity 
and consistency in the ICC Wind-Down Plan. In the counterparty 
contractual agreements chart in Section VIII, the proposed rule change 
would remove the reference to a service no longer received from a 
specific external service provider (i.e., receipt of market data to 
value FX positions and collateral). In Section XII, the proposed rule 
change would update the index of exhibits with the current versions of 
policies and procedures, consistent with updated footnote references.

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.\5\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \6\ and Rule 17Ad-22(e)(3)(ii).\7\
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    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 17 CFR 240.17Ad-22(e)(3)(ii).
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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 and, to the extent 
applicable, derivative agreements, contracts, and transactions, as well 
as to assure the safeguarding of securities and funds which are in the 
custody or control of ICC or for which it is responsible.\8\
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    As noted above, the proposed rule change primarily would update the 
Recovery Plan and Wind-Down Plan with current information about ICC's 
facilities, finances, operations, and Board. The Commission believes 
that by providing the most current information for ICC's revenues, 
volumes, and expenses, the proposed rule change will support ICC's 
ability to monitor its finances and compare its regulatory capital to 
its estimated recovery and wind-down costs. This in turn will help 
ensure ICC has the financial resources to promptly and accurately clear 
and settle transactions during recovery and, if necessary, conduct an 
orderly wind-down.
    Further, the Commission believes that updating the Counterparty 
Chart to reflect current roles and changes to the functions performed 
by certain counterparties will generally support those utilizing the 
Plans by providing users of the Plans a correct overview of ICC's 
counterparties. Similarly, the Commission believes that updating the 
description of ICC's Default Insurance Policy and Professional 
Liability/Cyber (E&O) Insurance Policy to reflect increase coverage 
amounts and current points of contact will generally support those 
utilizing the Plans by providing users of the Plans a correct overview 
of these insurance policies. The Commission believes that these 
proposed changes would strengthen both plans by ensuring those 
utilizing them have information necessary to carry out recovery or an 
orderly wind-down, which in turn should help ICC to promptly and 
accurately clear and settle transactions during recovery and, if 
necessary, conduct an orderly wind-down.
    ICC also proposed to include a reference to the thresholds for 
regulatory capital requirements that would trigger alerts for ICC 
nearing a capital requirement breach. This may lead to potential 
remedial actions, including whether ICC should initiate its plan to 
raise additional equity. The Commission believes that these proposed 
changes would strengthen the plans by ensuring those utilizing them 
have all of the information necessary to carry out recovery or an 
orderly wind-down, which in turn will help ensure ICC can promptly and 
accurately clear and settle trades and safeguard of securities and 
funds which are in its custody or control at these times.
    For the reasons stated above, the Commission believes that the 
proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act.\9\
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(3)(ii)

    Rule 17Ad-22(e)(3)(ii) requires ICC to establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to 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 includes plans for the recovery and orderly wind-
down of ICC necessitated by credit losses, liquidity shortfalls, losses 
from general business risk, or any other losses.\10\
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    \10\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The Commission believes the proposed changes described above that 
would add current financial, personnel, and board information support 
ICC's maintenance of plans for the recovery and orderly wind-down of 
ICC with updated accurate information. The proposed rule change also 
would addi details regarding the calculation of ICC's financial 
resources available for wind-down to reflect the new ICC Financial 
Resource Calculation Procedures. Additionally, ICC adds a reference to 
its thresholds for regulatory capital requirements that would trigger 
alerts for when ICC is nearing a capital requirement breach. The 
Commission believes that current financial information provides 
relevant information to those using the Plans to understand the 
resources available for recovery or an orderly wind-down.
    Therefore, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(e)(3)(ii).\11\
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    \11\ 17 CFR 240.17Ad-22(e)(3)(ii).
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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

[[Page 54373]]

Section 17A(b)(3)(F) of the Act \12\ and Rule 17Ad-22(e)(3)(ii).\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\14\ that the proposed rule change (SR-ICC-2023-007), be, and hereby 
is, approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17102 Filed 8-9-23; 8:45 am]
BILLING CODE 8011-01-P