Document ID: SEC-2021-1176-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Credit, LLC
Posted Date: 2021-08-31T04:00Z

[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48778-48779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18675]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92753; File No. SR-ICC-2021-015]

Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Governance Playbook, 
ICC Risk Management Framework, and ICC Treasury Operations Policies and 
Procedures

August 25, 2021.

I. Introduction

    On June 30, 2021, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission, pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4,\2\ a 
proposed rule change to amend the Governance Playbook, Risk Management 
Framework, and Treasury Operations Policies and Procedures (``Treasury 
Policy'') (together, the ``Documents''). The proposed rule change was 
published for comment in the Federal Register on July 20, 2021.\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 Filing of Proposed Rule Change Relating to the ICC Governance 
Playbook, ICC Risk Management Framework, and ICC Treasury Operations 
Policies and Procedures; Exchange Act Release No. 92402 (July 14, 
2021); 86 FR 38370 (July 20, 2021) (SR-ICC-2021-015) (``Notice'').
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II. Description of the Proposed Rule Change

    The proposed rule change would amend the ICC Governance Playbook, 
Risk Management Framework, and Treasury Policy to update descriptions 
of certain internal committees and make other clarification or clean-up 
changes.\4\ ICC maintains the Participant Review Committee (``PRC'') 
and the Credit Review Subcommittee of the PRC (``CRS'') (together, the 
``Committees''), which are internal committees that assist in 
fulfilling counterparty review responsibilities with respect to ICC's 
Clearing Participants (``CPs'') and financial service providers 
(``FSPs''). The proposed changes would amend descriptions related to 
membership composition, meeting frequency, and responsibilities of the 
Committees in the Documents to reflect recent changes to the 
Committees' charters.\5\
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    \4\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in the ICC Rules, as applicable.
    \5\ The description of the proposed rule change is excerpted 
substantially from the Notice.
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A. Governance Playbook

    The proposed rule change would amend Section IV of the Governance 
Playbook (Committees) to (i) simplify the description of the membership 
composition of the PRC by eliminating unnecessary prefatory language 
and (ii) add the ICC Risk Oversight Officer as a member. The proposed 
rule change would also amend the description of the CRS to remove the 
authority to approve FSPs and specify that the CRS has an advisory role 
and may make recommendations to the PRC with respect to matters of 
creditworthiness of CPs and creditworthiness and performance of FSPs. 
These changes would place FSP approval authority with the PRC and have 
its subcommittee, the CRS, assists it in fulfilling its counterparty 
review and approval responsibilities.
    The proposed changes would also update the membership composition 
of the CRS to include the Risk Oversight Officer (similar to the PRC), 
remove the ICC Risk Management representative as a voting member of the 
CRS, and state that Risk Management representatives will participate as 
non-voting members and present materials to allow the CRS to perform 
its responsibilities and duties. These changes would thus change Risk 
Management's role at the subcommittee level.
    The proposed rule change would also make a grammatical edit to 
refer to ``financial services providers'' as ``financial service 
providers'' in the description of the PRC and throughout the document.

B. Risk Management Framework

    The proposed rule change would amend Section II of the Risk 
Management Framework (Governance and Organization) to update a chart 
that details the governance and committee structure at ICC. The updated 
chart would indicate the current practice that the Intercontinental 
Exchange, Inc. (``ICE, Inc.'') Enterprise Risk Management Department 
(``ERM'') reports to the Board and corrects a typographical error to 
replace the ``BCP Oversight Committee'' with the ``BCP & DR Oversight 
Committee.''
    In Section II.A (Committees), the proposed changes would clarify 
current practice that, in addition to the overall Risk Management 
Framework and its associated policies and procedures being subject to 
Risk Committee review on at least an annual basis, the policies and 
procedures that comprise ICC's overall risk management framework are 
further subject to full Board review and approval at least annually.
    The proposal would also make a grammatical edit to refer to 
``financial services providers'' as ``financial service providers'' and 
add a footnote to specify that the types of entities included as FSPs 
are those to which ICC has actual or potential credit exposure, such as 
settlement banks, custodians, and other entities. Additionally, the 
proposal would specify that the PRC meets at least quarterly and more 
frequently as needed.
    The proposed changes would distinguish PRC and CRS responsibilities 
with respect to FSPs. The changes remove the authority from the CRS to 
approve FSPs and specify that it has only an advisory role, which is 
similar to its role in monitoring CPs' ongoing compliance with the 
standards and requirements of membership. The changes note that the PRC 
is responsible for overseeing the assessments and ultimate approval of 
FSPs. The CRS, as a subcommittee of the PRC, is responsible for 
assessing the creditworthiness and performance of would-be FSPs by 
conducting initial due diligence, performing ongoing credit monitoring 
of FSPs, and then making recommendations to the PRC for its approval.
    Finally, the proposed rule change would amend Appendix 1 to the 
document to update language (consistent with the remainder of the 
document) related to the membership composition of the PRC, including 
the addition of the President, Chief Operating Officer, and Risk 
Oversight Officer as members of the PRC, as well as to clarify current 
practice that the PRC would meet at least quarterly, and more 
frequently as needed.

C. Treasury Policy

    To reflect the CRS's new advisory role, the proposed rule change 
would amend Section IV (Cash Settlement) of the Treasury Policy by 
removing the required approval of the CRS before ICC may begin using a 
bank's services and replacing it with the required approval of the PRC. 
Consistent with the CRS's advisory role as a subcommittee, Section IV 
would be further amended to

[[Page 48779]]

indicate that the CRS would be authorized to make recommendations to 
the PRC regarding approval of the bank prior to accepting such 
services.

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.\6\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \7\ and Rules 17Ad-22(e)(2)(i) and (v).\8\
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    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
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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.\9\ As 
discussed above, the proposed rule change would change the roles of the 
CRS and PRC internal committees in approving financial services 
providers and making recommendations with respect to matters of 
creditworthiness of CPs and the creditworthiness and performance of 
FSPs, with FSP approval being reserved for the PRC. The proposed 
changes also add the Risk Oversight Officer to both committees and 
remove representatives from Risk Management from voting participation 
in the CRS. The Commission believes that changing the roles of the 
internal committees in this way would enhance ICC's ability to 
efficiently manage the risks associated with assessment and approval of 
CP and FSP counterparties by centering decision making and support 
amongst distinct committees. Further, the Commission believes that by 
changing voting representation in the CRS, the proposed changes would 
support its changed support role by clearly specifying how 
participation on the CRS works. The Commission believes that these 
changes would thus enhance ICC's ability to maintain the appropriate 
financial resources necessary for the prompt and accurate clearance and 
settlement of securities transactions and the safeguarding of 
securities and funds which are in the custody or control of ICC or for 
which it is responsible.
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission also believes that clarifying current practices 
related to the reporting line for the ERM, the frequency that the PRC 
meets, and the frequency with which the review and approval process of 
the policies and procedures that comprise ICC's overall risk management 
framework occurs, strengthens the Documents by ensuring that users are 
aware of reporting lines and when policies and procedures should be 
reviewed and approved. The Commission believes that this in turn 
enhances ICC's ability to promptly and accurately settle transactions 
and safeguard funds and securities by ensuring regular Document review 
intervals. Similarly, the grammatical changes noted above enhance the 
overall clarity of the Documents.
    For the reasons stated above, the Commission therefore believes 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act.

B. Consistency With Rule 17Ad-22(e)(2)(i) and (v)

    Rules 17Ad-22(e)(2)(i) and (v) requires each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to, as applicable, provide for 
governance arrangements that are clear and transparent and specify 
clear and direct lines of responsibility.\10\
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    \10\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
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    As described above, the proposed rule changes would revise the 
specific role of the PRC and CRS regarding counterparty review and 
approval by making the PRC solely responsible for approval and 
oversight of FSPs and placing the CRS in a supporting position to make 
recommendations to the PRC after assessing and monitoring 
counterparties. The proposed changes also change the membership 
composition of the CRS to include the Risk Oversight Officer and remove 
the ICC Risk Management representative as a voting member while 
continuing to present materials to allow the CRS to perform its 
responsibilities and duties.
    The Commission believes that by differentiating the 
responsibilities of the various committees, subcommittees, and their 
participants as noted above, these proposed changes provide for clear 
and transparent governance arrangements and specify clear and direct 
lines of responsibility to those serving on those committees and 
utilizing the Documents.
    The proposed changes would also revise a governance chart in the 
Documents to clarify that the ERM reports to the Board of ICC, which 
the Commission believes provides transparent governance and specify 
clear and direct lines of responsibility between the ERM and the Board.
    Lastly, by clarifying the review and approval process of the 
policies and procedures that comprise ICC's overall risk management 
framework, which consists of review by the Risk Committee and review 
and approval by the Board at least annually, the proposed rule change 
helps ensure that the risk management policies and procedures are 
subject to clear governance and specific direct lines of 
responsibility.
    For the reasons stated above, the Commission believes the proposed 
rule changes are consistent with Rules 17Ad-22(e)(2)(i) and (v).\11\
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    \11\ Id.
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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 Section 17A(b)(3)(F) of the 
Act \12\ and Rules 17Ad-22(e)(2)(i) and (v).\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
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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-2021-015), 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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18675 Filed 8-30-21; 8:45 am]
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