Notice2021-18675
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
Primary source
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Published
August 31, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 166 (Tuesday, August 31, 2021)</title>
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[Federal Register Volume 86, Number 166 (Tuesday, August 31, 2021)]
[Notices]
[Pages 48778-48779]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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]
BILLING CODE 8011-01-P
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