Notice2021-19863
Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICE Clear Credit Operating Agreement and Governance Playbook
Primary source
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Published
September 15, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 176 (Wednesday, September 15, 2021)</title>
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[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51391-51393]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-19863]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92918; File No. SR-ICC-2021-017]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the ICE Clear Credit
Operating Agreement and Governance Playbook
September 9, 2021.
I. Introduction
On July 20, 2021, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities and Exchange Act of 1934 (the
``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend and restate ICC's Fifth Amended and Restated Operating Agreement
(the ``Operating Agreement'') and make changes to the ICE Clear Credit
LLC Governance Playbook (the ``Governance Playbook''). The proposed
rule change was published for comment in the Federal Register on July
30, 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 ICE Clear Credit
Operating Agreement and Governance Playbook, Exchange Act Release
No. 92504 (July 26, 2021); 86 FR 41123 (July 30, 2021) (SR-ICC-2021-
017) (``Notice'').
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II. Description of the Proposed Rule Change
A. Operating Agreement
The proposed rule change would amend and restate the Operating
Agreement to (i) reduce the number of managers on ICC's Board of
Managers (the ``Board'') designated by its parent company, ICE US
Holding Company L.P. (``Parent''); (ii) remove certain outdated
provisions; and (iii) incorporate certain prior amendments and make
other non-substantive updates. After making such amendments with the
proposed rule change, ICC would adopt the amended Operating Agreement
as the Sixth Amended and Restated Operating Agreement.\4\
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\4\ This description is substantially excerpted from the Notice.
Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Operating Agreement or ICE Clear Credit
Rulebook, as applicable.
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i. Reduction in the Number of Managers Designated by Parent
Currently, the Operating Agreement provides that the Board will
consist of, among other managers, four managers elected by Parent and
at all times be independent in accordance with the requirements of each
of the New York Stock Exchange listing standards, the Act, and ICE's
Board of Director Governance Principles (collectively, the ``Parent
Independent Managers''). The proposed rule change would reduce the
number of Parent Independent Managers from four to three.
Similarly, the Operating Agreement currently provides that the
Board will consist of, among other managers, three other managers
elected by Parent (collectively, the ``Parent Non-Independent
Managers''). The proposed rule change would reduce the number of Parent
Non-Independent Managers from three to two.
As part of these changes, the proposed rule change would also
remove the names of the Parent Independent Managers and Parent Non-
Independent Managers. The Operating Agreement currently lists out the
names of the individual Parent Independent Managers and Parent Non-
Independent Managers. The proposed rule change would remove the names
of these individuals and instead would refer to the Parent Independent
Managers and Parent Non-Independent Managers only.
Finally, consistent with these changes, the proposed rule change
would reduce the total number of managers on the Board from eleven to
nine, reflecting one less Parent Independent Manager and one less
Parent Non-Independent Manager.
ii. Removal of Outdated Provisions
The proposed rule change would next remove outdated provisions
related to the conversion of ICC from a New York trust company to a
Delaware limited liability company in 2011 and ICC's operation prior to
the conversion. The Operating Agreement currently describes how ICC
made such a conversion and how ICC operated prior to the 2011
conversion. The proposed rule change would remove these provisions as
they are outdated and no longer need to be included in the Operating
Agreement. The proposed rule change would update related defined terms
and references as needed.
iii. Prior Amendments and Other Updates
Finally, the proposed rule change would make certain other
amendments and updates to the Operating Agreement. First, the proposed
rule change would update Section 3.03 to reflect prior amendments that
ICC made to the Operating Agreement without filing a proposed rule
change or restating the Operating Agreement. Section 3.03 provided that
the Board shall meet (i) in person no less frequently than quarterly
and (ii) telephonically no less frequently than two times per calendar
year. ICC previously amended this provision to provide instead that the
Board will meet no less frequently than quarterly at such time and
place as the Chair shall determine, and may meet more frequently
(either in person or telephonically) as circumstances dictate. ICC also
previously amended this provision to remove the requirement that the
Board meet telephonically no less than twice per calendar year.
Although ICC previously amended the Operating Agreement to make these
changes, it did not file a proposed rule change or restate the
Operating Agreement at such time. Thus, the proposed rule change would
reflect these prior amendments and ensure their inclusion in the Sixth
Amended and Restated Operating Agreement.
Second, throughout the Operating Agreement, the proposed rule
change would correct outdated references to the name, jurisdiction of
organization, and governing document of Parent and certain related
legal entities and would replace references to the Chief Executive
Officer of ICC with references to the President (which is the correct
title). ICC previously amended the Operating Agreement to include these
changes but, like the changes to Board meetings described immediately
above, did not file a proposed rule change and did not restate the
Operating Agreement after making these changes. Thus, the proposed rule
change would reflect these prior amendments and ensure their inclusion
in the Sixth Amended and Restated Operating Agreement.
Third, the proposed rule change would update the contact
information and addresses listed in Section 7.01 that are used for
providing notice to ICC and Parent under the Operating Agreement.
[[Page 51392]]
Fourth, the proposed rule change would update the contact
information and address for ICC's registered office and agent in
Delaware listed in Section 2.06.
Fifth, the proposed rule change would update references throughout
the Operating Agreement to refer to the Sixth Amended and Restated
Operating Agreement or the Fifth Amended and Restated Operating
Agreement, as needed in the context of the section.
Sixth, the proposed rule change would update the definition of
ICE's Board of Director Governance Principles to refer to the current
Independence Policy of the Board of Directors of ICE.
Finally, the proposed rule change would correct minor typographical
and grammatical errors.
B. Governance Playbook
The proposed rule change would update the Governance Playbook to
reflect the changes to the Operating Agreement described above. First,
the proposed rule change would update Section III.A to reflect the
revised composition of the Board--nine total managers with three Parent
Independent Managers and two Parent Non-Independent Managers. The
proposed rule change would make a similar change to Section III.F.
Second, the proposed rule change would update certain references
found in Footnote 1. Footnote 1 describes an aspect of the partnership
agreement of ICC's Parent. The proposed rule change would update the
name of the partnership agreement to reflect the current name of that
agreement and would correct the description of Parent's jurisdiction of
organization.
Third, the proposed rule change would update Footnote 5 to link to
the current Independence Policy of the Board of Directors of ICE,
similar to the change to the Operating Agreement discussed above
amending the definition of ICE's Board of Director Governance
Principles to refer to the current Independence Policy of the Board of
Directors of ICE.
Finally, the proposed rule change would make a minor revision to
Section III.C. That section currently provides that upon the
resignation of a manager, ICC's legal group is responsible for
obtaining a resignation letter. The proposed rule change would revise
this provision to provide that ICC's legal group is responsible for
reviewing a resignation letter if received, rather than obtaining one.
While it is common practice for a resigning manager to submit a
resignation letter, there is no overall requirement that a resigning
manager submit a resignation letter, and thus the legal group would no
longer be responsible for obtaining one.
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\ After careful review, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to ICC. In particular,
the Commission finds that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act \6\ and Rules 17Ad-22(e)(2)(i) and
(v).\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)(2)(i), (v).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) 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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The Commission believes that the changes discussed in Part II.A.i
above would improve the operation of the Board and clarity of the
Operating Agreement. In particular, the Commission believes that
reducing the overall number of managers from eleven to nine, by
reducing the number of Parent Independent Managers from four to three
and reducing the number of Parent Non-Independent Managers from three
to two, would help to ensure the efficient operation of the Board and
clarify the extent of Parent's ability to appoint managers. Moreover,
the Commission believes that removing the names of the individual
Parent Independent Managers and Parent Non-Independent Managers would
help to ensure that ICC is not required to amend the Operating
Agreement due to changes in such managers, thereby helping to ensure
the efficiency and flexibility of the Operating Agreement.
Similarly, the Commission believes that removal of the outdated
provisions related to the conversion of ICC and its operation prior to
2011, as discussed in Part II.A.ii above would help to promote the
promote consistency and readability of the Operating Agreement.
Moreover, the Commission believes that the other changes to the
Operating Agreement discussed in Part II.B.iii above would help to
ensure the clarity and efficient operation of the Operating Agreement.
Specifically, the Commission believes that requiring the Board to meet
no less frequently than quarterly at such time and place as determined
by the Chair and authorizing the Board to meet more frequently (either
in person or telephonically) as circumstances dictate, would help to
ensure the efficient operation of the Board and provide flexibility as
to how and when the Board meets. Similarly, the Commission believes
that correcting (i) outdated references to the name, jurisdiction of
organization, and governing document of Parent and certain related
legal entities; (ii) references to the Chief Executive Officer of ICC
so they refer instead to the President; (iii) references to the Sixth
Amended and Restated Operating Agreement and the Fifth Amended and
Restated Operating Agreement; (iv) the definition of ICE's Board of
Director Governance Principles to refer to the current Independence
Policy of the Board of Directors of ICE; and (v) minor typographical
and grammatical errors would help to ensure that the Operating
Agreement is clear, understandable, free of errors, and correctly
applied. Updating the contact information and addresses that are used
for providing notice to ICC and Parent and the contact information and
address for ICC's registered office and agent in Delaware would
similarly help to ensure that the Operating Agreement is clear and
correctly applied.
For similar reasons, the Commission believes that updating the
Governance Playbook to reflect these changes to the Operating
Agreement, as discussed in Part II.B above, would help to ensure the
clarity and efficient operation of the Governance Playbook. In
particular, the Commission believes that updating Section III.A to
reflect the revised composition of the Board--nine total managers with
three Parent Independent Managers and two Parent Non-Independent
Managers--would, for the reasons discussed above, help to ensure the
efficient operation of the Board. Moreover, the Commission believes
that updating the description related to Parent in Footnote 1 and the
link to the current Independence Policy of the Board of Directors of
ICE in Footnote 5 would help to ensure that the Governance Playbook is
clear, understandable, and correctly applied.
[[Page 51393]]
Finally, the Commission believes that revising Section III.C to specify
that ICC's legal group is responsible for reviewing a resignation
letter if received, rather than obtaining one, would clarify the role
of ICC's legal group.
Thus, the Commission believes that all of these changes, as
discussed above, would help to ensure the efficient operation of the
Board, Operating Agreement, and Governance Playbook and help to ensure
the Operating Agreement and Governance Playbook are clear, free of
errors, understandable, and correctly applied. Because ICC operates
pursuant to Board oversight and the governance set forth in the
Operating Agreement and Governance Playbook, the Commission believes
that these improvements would thereby generally help to improve the
efficiency and consistency of ICC's operations. The Commission also
believes that in so doing, these improvements would thereby help to
ensure that ICC is able to promptly and accurately clear and settle
securities transactions and assure the safeguarding of securities and
funds in ICC's custody or control or for which it is responsible.
Therefore, the Commission finds 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)(2)(i) and (v)
Rules 17Ad-22(e)(2)(i) and (v) require that ICC establish,
implement, maintain and enforce written policies and procedures
reasonably designed to provide for governance arrangements that are
clear and transparent and specify clear and direct lines of
responsibility.\10\ As discussed above, the Commission believes that
the changes to the Operating Agreement and Governance Playbook would
help to ensure that both documents are clear, understandable, and free
from error. Because ICC's governance operates pursuant to the Operating
Agreement and Governance Playbook, the Commission therefore believes
the proposed rule change would help to ensure that ICC's governance
arrangements are clear. Moreover, the Commission believes that revising
Section III.C of the Governance Playbook to specify that ICC's legal
group is responsible for reviewing a resignation letter if received,
rather than obtaining one, would specify a clear and direct
responsibility of the legal group. Therefore, the Commission finds the
proposed rule change is consistent with Rule 17Ad-22(e)(2)(i) and
(v).\11\
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\10\ 17 CFR 240.17Ad-22(e)(2)(i), (v).
\11\ 17 CFR 240.17Ad-22(e)(2)(i), (v).
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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), (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-2021-017) 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).
\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19863 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P
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