Notice2021-26530
Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Counterparty Monitoring Procedures and the Credit Rating System Model Description and Parameterization
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Published
December 8, 2021
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 86 Issue 233 (Wednesday, December 8, 2021)</title>
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[Federal Register Volume 86, Number 233 (Wednesday, December 8, 2021)]
[Notices]
[Pages 69699-69703]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26530]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93705; File No. SR-ICC-2021-021]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Counterparty Monitoring
Procedures and the Credit Rating System Model Description and
Parameterization
December 2, 2021.
I. Introduction
On October 13, 2021, 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,\2\ a proposed rule change to adopt the ICC
Counterparty Monitoring Procedures (the ``Procedures'') and the ICC
Credit Rating System Model Description and Parameterization (the ``CRS
Policy''). The proposed rule change was published for comment in the
Federal Register on November 1, 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 Counterparty
Monitoring Procedures and the Credit Rating System Model Description
and Parameterization; Exchange Act Release No. 34-93429 (Oct. 26,
2021); 86 FR 60305 (Nov. 1, 2021) (SR-ICC-2021-021) (``Notice'').
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II. Description of the Proposed Rule Change
A. Introduction
The new Procedures would describe ICC's policies and practices for
monitoring its counterparties, specifically its Clearing Participants
and the entities to which ICC has actual or potential credit exposure,
such as settlement banks and custodians (collectively, ``Financial
Service Providers'' or ``FSPs'').\4\ The new CRS Policy would describe
ICC's Credit Rating System (``CRS''), which ICC uses to analyze the
risks associated with counterparties.
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\4\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in the Procedures, the CRS Policy, or the
ICE Clear Credit Rules, as applicable.
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B. Procedures
The new Procedures would be a consolidation of two existing ICC
procedures with respect to counterparty credit risk--the ICC CDS
Clearing Counterparty Monitoring Procedures: Bank Counterparties
(``Bank CMPs'') and the ICC CDS Clearing Counterparty Monitoring
Procedures: FCM Counterparties (``FCM CMPs''). Although the new
Procedures would be substantially the same as these two existing
policies, the Procedures would contain some changes from the existing
policies, as further described below.
The Procedures would consist of eleven sections, each of which is
described below: (i) Introduction and overview; (ii) roles and
responsibilities; (iii) standards for counterparty relationships; (iv)
monitoring scope and procedures; (v) counterparty credit rating system;
(vi) watch list criteria; (vii) actions available to the clearing
house; (viii) information privacy; (ix) record keeping; (x) referenced
documentation; (xi) revision history.
Section one would provide an introduction to, and overview of, the
Procedures. This section would note that the performance of ICC depends
on the financial stability of its Clearing Participants and FSPs, and
accordingly, ICC monitors its relationships with such counterparties.
Section one would note further that a variety of entities could be
Clearing Participants and FSPs, such as broker-dealers and futures
commission merchants in the case of Clearing Participants, and
settlement banks and repo counterparties in the case of FSPs. Using the
CRS, ICC would rate its counterparties and identify counterparties that
exhibit inconsistent financial and operational performance, or that
show signs of weakness and require more intensive examination. Section
one of the new Procedures would be largely the same as the introductory
sections of the Bank CMPs and FCM CMPs.
Section two would describe the roles and responsibilities of ICC
personnel and committees. With respect to the counterparties
themselves, the Procedures would note that Clearing Participants and
FSPs are responsible for providing information requested by ICC, and
that Clearing Participants in particular must comply with the
qualifications and requirements set out in the ICC Rules. With respect
to ICC, the Risk Department would monitor all counterparties intra-day,
daily, and monthly and would implement the CRS. The Risk Department
also would present information regarding counterparties to the
Participant Review Committee and the Credit Review Subcommittee. The
Participant Review Committee would be responsible for (i) reviewing
applications for membership at ICC; (ii) monitoring ongoing compliance
with ICC membership
[[Page 69700]]
requirements (including financial, operational, legal, and compliance
requirements); (iii) overseeing the due diligence and approval of FSPs;
(iv) recommending to the ICC Chief Risk Officer (``CRO'') a
counterparty for suspension/termination or for placement on or removal
from the Watch List; and (v) overseeing the withdrawal process for
Clearing Participants and FSPs. The Credit Review Subcommittee of the
Participant Review Committee would assist in carrying out these
responsibilities, review reports, and present recommendations to the
Participant Review Committee or CRO. The CRO would be responsible for
reviewing and validating the Risk Department's counterparty credit
findings and recommendations and for determining if a counterparty
should be added to, or removed from, the Watch List. Finally, the
Operations Department would be responsible for monitoring the
operational and settlement process performance of all counterparties,
and the Treasury Department would be responsible for monitoring the
money movements between Clearing Participants and ICC. The information
in Section two of the new Procedures would be largely the same as what
is currently found in the Bank CMPs and FCM CMPs, with a few changes.
For example, under the new Procedures, the Participant Review Committee
would be responsible for overseeing the due diligence and approval of
FSPs, while this responsibility is not explicitly assigned under the
current Bank CMPs and FCM CMPs. Moreover, the new Procedures would
assign responsibility for implementing the CRS explicitly to the Risk
Department.
Section three would describe the minimum standards applicable to
counterparties as well as the onboarding and withdrawal of
counterparties. The Procedures would note that the minimum standards
for Clearing Participants are found in Chapter 2 of the ICC Rules, as
well as certain other ICC policies and procedures. With respect to
FSPs, the Procedures would explain that all FSPs must meet the
following minimum requirements: (i) Approval by the Participant Review
Committee; (ii) satisfaction of all the operational requirements of the
ICC Treasury Department; and (iii) subject to regulation and
supervision by a competent authority. Section three also would note
that the onboarding and withdrawal process is found in certain other
ICC policies and procedures and would describe the responsibilities of
the Risk Department and Participant Review Committee with respect to
onboarding and withdrawal of FSPs. Specifically, for FSPs the Risk
Department would: (i) Collect all relevant financial and market
information necessary to compute credit scores; (ii) require the
potential new FSP to complete the risk review questionnaire; (iii)
present the completed risk review questionnaire including the final
credit score to the Credit Review Subcommittee and Participant Review
Committee; and (iv) obtain approval from the Participant Review
Committee for the new FSP. With respect to the withdrawal of FSPs, the
Participant Review Committee would: (i) Obtain written confirmation
from the ICC Treasury Department that at all exposures to the FSP have
been closed out and (ii) obtain written confirmation from the ICC Legal
Department that all legal agreements with the FSP have been terminated.
Section three would be a new section under the Procedures.
Section four of the Procedures would describe how ICC monitors
counterparties. Section four would first describe what ICC monitors
counterparties for--financial stability, creditworthiness, operational
capability, and competence. Section four also would note that the
financial stability elements of such monitoring are set out in ICC Rule
201. Section four would note further that in addition to those
financial elements, ICC would monitor Clearing Participants for: (i)
Material breach of the rules or regulations of any regulatory, self-
regulatory, or other entity to which the Clearing Participant is
subject; (ii) participation in the End of Day price discovery process;
(iii) participation in disaster recovery and default management
simulations. Moreover, specific to FSPs, ICC also would review their
liquidity and cash management.
ICC would conduct this monitoring intra-day and daily, monthly, and
periodically as needed. With respect to intra-day and daily monitoring,
the ICC Risk Department would, among other things, (i) monitor the Risk
Filter Threshold, meaning the intraday risk associated with incoming
real-time position changes to a portfolio that may require pre-funding;
(ii) review end-of-day changes to Initial Margin and Guaranty Fund
requirements; and (iii) monitor the daily news and market metrics for
Clearing Participants and FSPs. The Risk Department would escalate to
the Chief Risk Officer any issues identified during the intra-day and
daily monitoring.
For monthly monitoring, the Risk Department would prepare a credit
report on the financial condition of all counterparties. The Chief Risk
Officer and the Credit Review Subcommittee would each review the
report. The report would include, among other things, information on
the exposure of ICC to counterparties and the watch list. Monthly
monitoring also would include, among other things, review of ICC's
overall exposure to each Clearing Participant and FSP and their credit
scores and review of investment allocation for investment
counterparties. The Risk Department would escalate to the Chief Risk
Officer any issues identified during the monthly monitoring.
As part of this intra-day, daily, and monthly monitoring, ICC would
monitor its aggregate exposure to counterparties. This aggregate
exposure would include all exposure ICC has to an entity and its
affiliates, including exposure resulting from multiple relationships
with an entity (such as a Clearing Participant that is also a FSP). ICC
would manage its exposures to FSPs using investment allocations and its
exposures to Clearing Participants using Risk Filter Threshold
(``RFT'') allocations. Investment allocations would be the limit
established by the Risk Department for each FSP. The Risk Department
would review the investment allocations annually, or more frequently as
needed (such as when a FSP is placed on the watch list). The Risk
Department would review RFT allocations monthly, or more frequently as
needed (such as when a Clearing Participant is placed on the watch
list).
In addition to intra-day, daily, and monthly monitoring, ICC also
would conduct periodic risk reviews of counterparties. ICC would
conduct an initial risk review of all counterparties as part of the
onboarding process for new counterparties. After the initial risk
review, the Risk Department would periodically update and amend any
relevant information related to the review. Section four of the
Procedures would describe this update process as a Periodic Risk
Review, and the Risk Department would complete a Periodic Risk Review
for each counterparty within a four-year timeframe. The Periodic Risk
Review would be specific to the type of counterparty, Clearing
Participant or FSP, and with respect to FSPs, specific to the service
provided by the FSP. Section four of the Procedures would describe the
process for completing a Periodic Risk Review, which would include,
among other steps, sending a questionnaire to the counterparty and
reviewing the information provided by the counterparty. A Periodic Risk
Review
[[Page 69701]]
could result in: (i) A satisfactory finding, meaning the counterparty
has the process and procedures in place to provide reasonable assurance
that the counterparty will be able to perform as required under the
counterparty contractual obligations, or (ii) an unsatisfactory
finding, meaning the counterparty does not have the process and
procedures in place to provide reasonable assurance that it will be
able to perform as required under the contractual obligations. Finally,
ICC could perform more frequent Periodic Risk Reviews where: (i) The
latest Periodic Risk Review was considered unsatisfactory or (ii) the
counterparty was recently placed on the highest watch list level.
The information in section four of the new Procedures would be
substantively the same as the information currently found in the Bank
CMPs and FCM CMPs, with additional detail. For example, the details
regarding the monitoring of the RFT threshold consumption and the
description of how issues are escalated and resulting actions are
documented, would be new, but ICC represents these would not be a
material change to current ICC practice.\5\ The description of ICC's
monitoring and management of aggregate exposure to entities with which
ICC maintains multiple counterparty relationships, the procedures
associated with FSP investment allocation and RFT limits, and the
description of the periodic risk reviews also would be new, additional
details versus the current Bank CMPs and FCM CMPs.\6\ The current Bank
CMPs and FCM CMPs contain a list of general information maintained for
each counterparty, and while ICC still maintains this information, the
new Procedures describe the responsibilities associated with
maintaining this information rather than listing all of the
information.\7\ Moreover, the current Bank CMPs and FCM CMPs contain a
description of annual monitoring, and this annual monitoring would be
part of the monthly monitoring under the new Procedures.\8\
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\5\ Notice, 86 FR at 60307.
\6\ Notice, 86 FR at 60307.
\7\ Notice, 86 FR at 60307.
\8\ Notice, 86 FR at 60307.
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Section five would provide a summary description of ICC's CRS. The
CRS Policy, as described below, would provide the specific details with
respect to the CRS. Section five of the new Procedures would be largely
the same as the corresponding sections of the Bank CMPs and FCM CMPs.
Section six would describe ICC's watch list. The watch list is a
list of counterparties that could pose additional risk to ICC; thus, it
is a tool that ICC uses to separate counterparties that pose a greater
risk than others. ICC would automatically place counterparties on the
watch list if they have certain credit scores under the CRS. Moreover,
ICC would consider certain qualitative factors for placing
counterparties on the watch list, such as decreasing levels of
capitalization. Except for automatic placements resulting from certain
credit scores under the CRS, the Chief Risk Officer would determine
whether to add a counterparty to the watch list. The Chief Risk Officer
also would determine whether to remove a counterparty from the watch
list, but counterparties would need to have a stable credit score below
3.0 for at least three months to be removed from the watch list. The
information in this section would be largely the same as the
corresponding sections of the Bank CMPs and FCM CMPs, except that the
new Procedures would provide additional information about automatic
placement on the watch list.
Section seven would describe the actions that ICC could take for
counterparties placed on the watch list. As an initial matter, the
Chief Risk Officer would review ICC's exposure relative to the
counterparty's risk profile to determine if any action is necessary.
With respect to a Clearing Participant, the Chief Risk Officer would
review the Clearing Participant's net positions, collateral held,
market movements and magnitude of the Clearing Participant in the
relevant marketplace. The Risk Department would contact the
counterparty to discuss the activity that raised the concern. The Chief
Risk Officer would document the details, rationale, and criteria used
in determining the actions taken against the CP, and present this
documentation to the Credit Review Subcommittee. With respect to FSPs,
concerns would be escalated to the ICC Senior Management, who would
evaluate the issues and determine what, if any, additional actions
should be taken. Among other actions, the Chief Risk Officer could
determine to increase initial margin requirements, reduce a Clearing
Participant's positions, or terminate a relationship with a FSP. The
information in this section would be largely the same as the
corresponding sections of the Bank CMPs and FCM CMPs.
Section eight would describe how ICC maintains the confidentiality
and privacy of credit scores and other information related to
counterparties. This would be a new section under the Procedures.
Section nine would summarize how ICC maintains the documents,
reports, and other records required under the Procedures, in accordance
with its overall document retention policy. This would be a new section
under the Procedures.
Section ten would provide a list of other ICC documentation
referenced by the Procedures. This would be a new section under the
Procedures.
Finally, section eleven would describe the revision history of the
Procedures. This would be a new section under the Procedures.
C. CRS Policy
The CRS Policy would describe ICC's CRS. The CRS Policy would
consist of nine sections, each of which is described below: (i)
Executive summary; (ii) credit rating system scope; (iii) model
foundations and approach; (iv) model specification; (v) credit rating
system data description; (vi) model performance testing; (vii)
assessment of assumptions and limitations; (viii) bibliography and
appendices; (ix) revision history.
Like the new Procedures, the CRS Policy would incorporate certain
sections from the Bank CMPs and FCM CMPs. These sections would include
information on internal ratings, data sources, and the CRS model. While
the CRS Policy would take the same approach as currently found in the
Bank CMPs and FCM CMPs, the CRS Policy would contain additional detail
with respect to: (i) ICC's credit scoring approach in section one; (ii)
model foundations and selection of credit risk factors and metrics in
section three; (iii) testing of the weights between metrics and model
performance testing in sections four and six; (iv) data sources and
data quality in section five; and (v) assumptions and limitations of
the CRS in section seven.\9\
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\9\ Notice, 86 FR at 60307.
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The first section would summarize the CRS, including its purpose,
assumptions, and limitations. As mentioned above, ICC uses the CRS to
analyze the risks associated with counterparties. The CRS would do so
by estimating a credit score for each counterparty. The credit score
would range from one to five, with one being the best and five being
the worst. Credit scores themselves would be a weighted combination of
scores under seven individual credit risk factors. As would be noted,
credit scores would not be intended to estimate probabilities of
[[Page 69702]]
default or forecast counterparty defaults and would depend on the
quality and stability of the input data used to compute the credit
scores.
The second section would describe the scope of the CRS. The CRS
would consist of two credit scoring models: (i) One for counterparties
that are banks and investment subsidiaries engaged in the business of
buying and selling securities and other financial products as well as
custodian and depository services, including Self-Clearing Members,
which do not solicit or accept orders from customers; (ii) and another
for Clearing Participants that solicit or accept orders from customers.
Each credit scoring model would consist of seven credit risk factors,
with a different percentage weight assigned to each credit risk factor
under the two different models. Moreover, section two would describe
the interpretation of credit scores, ranging from one to five, and
would summarize the data required to compute the credit scores.
Finally, section two would describe where the CRS fits in ICC's
technology structure.
Section three would describe the foundations and approach of the
CRS model, which, as discussed, consistent of seven credit risk
factors. The credit risk factors would be divided into financial and
market metrics. Financial metrics would provide a point-in-time view of
the state of the company, while market metrics would be used to capture
frequent changes in the market sentiment of the companies facing ICC.
Section three would include descriptions of the credit risk factors.
For each credit risk factor, section three would specify corresponding
metrics, relevant definitions, formulas, applicability based on type of
counterparty, and key regulatory requirements, among other information.
The CRS also would consider a qualitative assessment, which allows
flexibility to incorporate additional information (e.g., business risk,
litigation risk, management actions) regarding the counterparty into
the credit score, and provides a range of possible qualitative
assessment scores and qualitative assessment score interpretations.
Furthermore, section three would explain that ICC could use other data
as a proxy for certain financial metrics that some counterparties may
not report.
Section four would detail the specifications of the CRS model,
including the calibration of model weights and parameterization. Each
credit risk factor would receive its own credit risk factor-specific
weight. Section four would note how credit risk factor weights are
determined and would discuss the testing of the weights between the
financial and market metrics to measure the effectiveness of the
scoring model in identifying early signs of weakness. Section four also
would discuss metric parameterization for each credit risk factor and
would describe, among other things, input values, metric descriptions,
graphical representations, assumptions, parameter sets, and calibrated
values.
Section five would describe the data that the CRS would use to
calculate credit scores. This section also would describe the sources
for that data, and how ICC would ensure the adequacy of the data and
the remediation of any inconsistencies. Section five also would
describe how ICC adjusts and reallocates component weights based on the
availability of data.
Section six would describe how ICC tests the performance of the CRS
model. ICC would review the credit risk factors, corresponding metrics,
and parameterization at least once a year to assess the model's
discriminative power. This assessment would include reviewing the
historical performance of the model.
Section seven would describe the assumptions and limitations of the
CRS. Among other things, section seven would note that credit scores
would not represent a probability of default or forecast company
defaults and further that the CRS assumes that market data upon which
scores are based is reliable and is representative of the current
market conditions.
Section eight would contain a list of references and section nine
would describe the revision history of the CRS Policy.
Finally, there would be four appendices to the CRS Policy, which
would include other relevant information for the CRS, such as a list of
systemically important financial institutions.
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.\10\ For the reasons discussed below, the Commission finds
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act,\11\ and Rules 17Ad-22(e)(2)(v) and (e)(3)(i).\12\
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\10\ 15 U.S.C. 78s(b)(2)(C).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 17 CFR 240.17Ad-22(e)(2)(v) and (e)(3)(i).
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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.\13\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission believes that taken together, the Procedures and CRS
Policy would help ICC to manage the risk arising from its exposures to
counterparties. For example, the Commission believes that the
Procedures would help to ensure that ICC personnel are engaged in
reviewing and limiting ICC's exposure to counterparties, by making
various ICC personnel responsible for rating and monitoring
counterparties, and for taking mitigating actions as needed. Moreover,
the Commission believes that the minimum standards for counterparties,
such as being subject to regulation and supervision by a competent
authority, would help to ensure that all Clearing Participants and FSPs
have a baseline of financial and operational reliability. The
Commission further believes that intra-day, daily, monthly, and
periodic monitoring, as well as the use of the watch list, would help
to ensure that ICC identifies counterparties at risk of financial or
operational difficulty. Reviewing end-of-day changes to Initial Margin
and Guaranty Fund requirements and monitoring overall aggregate
exposure, through the Risk Filter Threshold and Investment Allocations,
should similarly help ICC to measure its exposure to counterparties.
Monitoring and measuring ICC's exposure to counterparties should in
turn trigger mitigating actions also needed to help ICC to reduce or
eliminate its exposure to a Clearing Member or FSP. Finally, the
Commission believes that the CRS Policy, in describing the CRS and
ICC's credit scoring models, would be an essential part of ICC's
monitoring and mitigation of the risk arising from its exposures to
Clearing Participants and FSPs.
The Commission believes that counterparty credit risk poses a risk
to ICC's financial resources because
[[Page 69703]]
default by a Clearing Participant could leave ICC under-collateralized
and default by an FSP could cause ICC to lose its investments or
expected return of cash. The Commission therefore believes that default
by a Clearing Participant and default by an FSP could cause ICC to lose
default resources and operational capital. The Commission believes that
such losses could, in turn, threaten ICC's ability to operate and
therefore clear and settle transactions and assure the safeguarding of
securities and funds.
Thus, the Commission believes that effective management of ICC's
counterparty credit risk could help ICC to control risks to the
financial resources needed to clear and settle transactions and to
assure the safeguarding of securities and funds in its custody or
control. The Commission therefore believes that, by establishing the
actions ICC would take to assess, monitor, and mitigate counterparty
credit risk, the Procedures and CRS Policy would help ICC to manage
counterparty credit risk and thereby would promote the prompt and
accurate clearance and settlement of securities transactions and assure
the safeguarding of securities and funds which are in the custody or
control of ICC or for which it is responsible.
Therefore, the Commission finds that the proposed rule change is
consistent with Section 17A(b)(3)(F) of the Act.\14\
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\14\ 15 U.S.C. 78q-1(b)(3)(F).
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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.\15\ As discussed above, the Procedures
would assign roles and responsibilities to various ICC groups and
personnel. For example, the Risk Department would monitor all
counterparties intra-day, daily, and monthly and would implement the
CRS; the Operations Department would monitor the operational and
settlement process performance of all counterparties; the Treasury
Department would monitor money movements between Clearing Participants
and ICC; and the CRO would be responsible for reviewing and validating
the Risk Department's counterparty credit findings and recommendations
and for determining if a counterparty should be added to, or removed
from, the Watch List. The Commission believes that these provisions, as
well as the other roles and responsibilities described above, would
specify clear and direct lines of responsibility for ICC groups and
personnel.
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\15\ 17 CFR 240.17Ad-22(e)(2)(v).
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Therefore, the Commission finds that the proposed rule change is
consistent with Rule 17Ad-22(e)(2)(v).\16\
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\16\ 17 CFR 240.17Ad-22(e)(2)(v).
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C. Consistency With Rule 17Ad-22(e)(3)(i)
Rule 17Ad-22(e)(3)(i) requires that ICC establish, implement,
maintain and 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 specified periodic basis and
approved by the board of directors annually.\17\
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\17\ 17 CFR 240.17Ad-22(e)(3)(i).
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As discussed above, the Procedures and CRS Policy would describe
how ICC evaluates and monitors risks posed by its counterparties, and
how ICC mitigates such risks. The Commission believes that together
these documents would allow ICC to measure comprehensively the credit
risk posed by Clearing Participants and FSPs through, among other
things, assessing the financial status of Clearing Participants and
FSPs and determining ICC's aggregate exposure to Clearing Participants
and FSPs. The Commission further believes that the CRS, watch list,
periodic monitoring, and exposure limits would provide ICC a
comprehensive means of monitoring the credit risk posed by Clearing
Participants and FSPs. Finally, the Commission believes that the
mitigating actions discussed above would reduce or eliminate ICC's
exposure to a Clearing Participant or FSP, thereby helping ICC manage
overall credit risk.
Therefore, the Commission finds that the proposed rule change is
consistent with Rule 17Ad-22(e)(3)(i).\18\
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\18\ 17 CFR 240.17Ad-22(e)(3)(i).
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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 \19\ Rules 17Ad-22(e)(2)(v) and (e)(3)(i).\20\
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
\20\ 17 CFR 240.17Ad-22(e)(2)(v) and (e)(3)(i).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\21\ that the proposed rule change (SR-ICC-2021-021), be, and hereby
is, approved.\22\
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\21\ 15 U.S.C. 78s(b)(2).
\22\ 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.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26530 Filed 12-7-21; 8:45 am]
BILLING CODE 8011-01-P
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