Notice2022-07951
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Recovery Plan and the ICC Wind-Down Plan
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 72 (Thursday, April 14, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 72 (Thursday, April 14, 2022)]
[Notices]
[Pages 22276-22280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-07951]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94650; File No. SR-ICC-2022-004]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the ICC Recovery Plan and
the ICC Wind-Down Plan
April 8, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on
April 1, 2022, ICE Clear Credit LLC (``ICC'') filed with the Securities
and Exchange Commission (the ``Commission'') the proposed rule change
as described in Items I, II, and III below, which Items have been
prepared primarily by ICC. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
ICC Recovery Plan and the ICC Wind-Down Plan (collectively, the
``Plans''). These revisions do not require any changes to the ICC
Clearing Rules (the ``Rules'').
[[Page 22277]]
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change,
security-based swap submission, or advance notice and discussed any
comments it received on the proposed rule change, security-based swap
submission, or advance notice. The text of these statements may be
examined at the places specified in Item IV below. ICC has prepared
summaries, set forth in sections (A), (B), and (C) below, of the most
significant aspects of these statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICC proposes revising the ICC Recovery Plan and the ICC Wind-Down
Plan, which serve as 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, consistent with Rule 17Ad-
22(e)(3)(ii).\3\ ICC proposes to make such changes effective following
Commission approval of the proposed rule change. The proposed rule
change is described in detail as follows.
---------------------------------------------------------------------------
\3\ 17 CFR 240.17Ad-22(e)(3)(ii).
---------------------------------------------------------------------------
ICC Recovery Plan
Consistent with the regulations applicable to ICC, the Recovery
Plan is designed to establish ICC's actions to maintain its viability
as a going concern to address any uncovered credit loss, liquidity
shortfall, capital inadequacy, or business, operational or other
structural weakness that threatens ICC's viability. ICC proposes
general updates and edits to promote clarity and to ensure that the
information provided is current. The proposed amendments reflect and
relate to changes that impacted ICC in the past year, including changes
to the composition of the ICC Board of Managers (collectively, the
``Board'' and each, a ``Manager'') and the responsibilities and
membership composition of internal committees.
ICC proposes general updates to ensure that the information in the
Recovery Plan is current. In Section I and throughout the document, the
proposed changes specify that the information provided is current as of
December 31, 2021, unless otherwise stated. Namely, the proposed
changes ensure that relevant information regarding ICC for recovery
planning, such as information about ICC's ownership and operation, is
current with respect to:
<bullet> Activities of Intercontinental Exchange, Inc. (``ICE'' or
collectively, the ``ICE Group'' of affiliated companies with ICE as the
ultimate parent) in Section II.A;
<bullet> clearing Index Swaptions by ICC in Section IV.A;
<bullet> data regarding ICC revenues, volumes, and expenses in
Section IV.D;
<bullet> ICC personnel and facilities in Section VI.A;
<bullet> financial resources for recovery in Section X;
<bullet> ICC and ICE Group financial information in Section XI; and
<bullet> Financial service providers (``FSPs'') that hold Clearing
Participant (``CP'') cash and collateral in Appendix C in Section XIII.
Additionally, ICC proposes to amend the composition of the Board
and the descriptions of internal committees to reflect changes that
impacted ICC in 2021. In Section IV.C.1, ICC proposes to change the
Board size from eleven to nine managers, consistent with the adoption
of the Sixth Amended and Restated Operating Agreement of ICC in 2021
(the ``Sixth A&R Operating Agreement''), and to revise Manager titles
as necessary.\4\ In Section IV.C.3, the proposed changes update the
responsibilities and membership composition of the Participant Review
Committee (``PRC'') and Credit Review Subcommittee of the PRC
(``CRS''), which are internal committees that assist in fulfilling
counterparty review responsibilities, consistent with changes to their
charters in 2021.\5\ ICC proposes corresponding changes in Section
VI.B.1 to describe the advisory role of the CRS in making
recommendations to the PRC and the role of the PRC in approving FSPs.
---------------------------------------------------------------------------
\4\ See SR-ICC-2021-017 for additional information on the
adoption of the Sixth A&R Operating Agreement.
\5\ See SR-ICC-2021-015 for additional information on the roles
and responsibilities of the PRC and CRS.
---------------------------------------------------------------------------
ICC proposes additional updates to promote clarity and consistency
in the Recovery Plan. Amended Section IV.E.4 notes that ICC monitors
FSPs daily, intraday, and monthly, consistent with the processes
described in the ICC Counterparty Monitoring Procedures.\6\ In Section
VII.B, ICC proposes to remove a metric that is no longer utilized to
measure ICC performance and to update a reference to a policy section.
Amended Section VII.C specifies that ICC will make required disclosures
pursuant to applicable regulations once the Recovery Plan is initiated
and includes updated regulatory contacts. In Section VIII.B.2, ICC
proposes minor language clarifications in describing the purpose of its
Liquidity Risk Management Framework. In Section VIII.B.3, ICC proposes
updates regarding the insurance coverage maintained at the ICE Group
level, which may be used as a recovery tool in a non-CP default
scenario.
---------------------------------------------------------------------------
\6\ See SR-ICC-2021-021 for additional information on ICC's
counterparty monitoring processes and procedures.
---------------------------------------------------------------------------
ICC proposes changes related to seeking additional capital from the
ICE Group in Section VIII.B.3, which is another recovery tool that may
be used in a non-CP default scenario. The proposed changes include
updated financial information, which is intended to establish that the
ICE Group is capable of making such infusion. Given the changes in
Board composition, ICC proposes revised procedures for seeking such
additional capital, including the individual within the ICE Group with
whom such discussions would begin. The proposed changes identify the
role of this individual within the ICE Group and update the composition
of certain ICE Group boards. Additionally, ICC proposes to include
updated financial information that is relevant to the execution of
other recovery tools that may be utilized in a non-CP default scenario.
ICC proposes additional minor edits for clarity and consistency. In
Section IX, ICC proposes to clarify that the Recovery Plan is made
available to regulators in accordance with relevant regulations and to
incorporate a reference to the ICC Default Management Procedures for
details on ICC's default management testing. In Section XIV, the
proposed changes update the index of exhibits with the current versions
of policies and procedures, consistent with updated footnote
references. Finally, ICC proposes minor typographical fixes in the
Recovery Plan as well as conforming changes in in the Wind-Down Plan,
including updates to entity names, and grammatical and formatting
changes.
ICC Wind-Down Plan
The Wind-Down Plan is designed to establish how ICC could be wound-
down in an orderly manner. ICC proposes corresponding changes to the
Wind-Down Plan. ICC proposes general updates and edits to promote
clarity and to ensure that the information provided is current. The
proposed amendments reflect and relate to changes that have impacted
ICC in the past year, including changes to the composition of the
Board.
[[Page 22278]]
ICC proposes general updates to ensure that the information in the
Wind-Down Plan is current. In Section I and throughout the document,
the proposed changes specify that the information provided is current
as of December 31, 2021, unless otherwise stated. The proposed
revisions ensure that relevant information regarding ICC for wind-down
planning, such as information about ICC's ownership and operation, is
current with respect to:
<bullet> Activities of ICE in Section II.A;
<bullet> ICC personnel and facilities in Section VII.C;
<bullet> financial resources to support wind-down in Section IX;
and
<bullet> FSPs that hold CP cash and collateral in Appendix C in
Section XI.
ICC also proposes amendments with respect to the composition of the
Board to reflect changes that impacted ICC in 2021. In Section IV.B.1,
ICC proposes to change the Board size from eleven to nine managers,
consistent with the adoption of the Sixth A&R Operating Agreement in
2021, and revise manager titles as needed.
ICC proposes additional updates and edits to promote clarity and
consistency in the Wind-Down Plan. Amended Section VI.A specifies that
ICC will make required disclosures pursuant to applicable regulations
once the decision to wind-down is made and includes updated regulatory
contacts. Furthermore, given the changes in Board composition, ICC
proposes revised procedures for seeking certain required consultations
or approvals identified in the Wind-Down Plan, including the individual
within the ICE Group with whom such discussions would begin. The
proposed changes identify the role of this individual within the ICE
Group and include information on the composition of a relevant ICE
Group board. In Section X, ICC proposes to note that the Wind-Down Plan
is made available to regulators in accordance with relevant regulations
and to clarify the testing of the Wind-Down Plan. In Section XII, the
proposed changes update the index of exhibits with the current versions
of policies and procedures, consistent with updated footnote
references.
(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \7\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\8\ In particular, Section 17A(b)(3)(F) of the Act \9\
requires that the rule change be consistent with the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts and transactions cleared by ICC, the
safeguarding of securities and funds in the custody or control of ICC
or for which it is responsible, and the protection of investors and the
public interest.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1.
\8\ 17 CFR 240.17Ad-22.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
ICC believes the proposed changes would enhance its ability to
effectuate a successful recovery as well as to execute an orderly wind-
down by providing updates and additional clarity with respect to ICC's
recovery and wind-down processes and procedures. As discussed herein,
the proposed revisions ensure that relevant information regarding ICC
for recovery and wind-down planning is current, including updated
information regarding personnel and facilities, finances and
operations, and financial resources for recovery and wind-down. The
proposed amendments also reflect and relate to changes that impacted
ICC in the past year, including changes to the Board composition from
the adoption of the Sixth A&R Operating Agreement and the
responsibilities and membership composition of internal committees
based on their amended charters. Such changes ensure that the Plans
clearly and accurately set out the functions of the Board and
committees to remain effective and to ensure that these groups carry
out their required functions. To support and enhance the implementation
of the Plans, additional language clarifications or edits are included
so that the Plans remain up-to-date, transparent, and focused on
clearly articulating the policies and procedures used to support ICC's
recovery and wind-down efforts. Such revisions include additional
details regarding required disclosures, references to relevant
policies, updated information regarding recovery tools, and amended
language that is intended to be more precise. The Plans would thus
promote ICC's ability to continue providing clearing services with as
little disruption as possible, and should continuation not be feasible,
promote ICC's ability to discontinue clearing services in an orderly
manner with minimum negative impact to the marketplace and
stakeholders. Accordingly, in ICC's view, the proposed rule change is
consistent with the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions, the safeguarding of securities and funds in the custody
or control of ICC or for which it is responsible, and the protection of
investors and the public interest, within the meaning of Section
17A(b)(3)(F) of the Act.\10\
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
The proposed rule change would also satisfy the relevant
requirements of Rule 17Ad-22.\11\ Rule 17Ad-22(e)(2) \12\ requires ICC
to establish, implement, maintain, and enforce written policies and
procedures reasonably designed to provide for governance arrangements
that are (i) clear and transparent; (iii) support the public interest
requirements of Section 17A of the Act \13\ applicable to clearing
agencies, and the objectives of owners and participants; and (v)
specify clear and direct lines of responsibility. The Plans clearly and
transparently set forth the governance arrangements that are relevant
to recovery and wind-down, including the roles and responsibilities of
the Board, applicable committees, and management. The Plans assign and
document responsibility and accountability for key recovery and wind-
down decisions, such as activating the Recovery Plan and deciding to
wind-down the business, and require consultation or approval from
relevant parties. Given the change in Board composition, the proposed
changes update procedures for seeking additional capital in a recovery
scenario and update procedures for seeking required consultations or
approvals in a wind-down scenario from the ICE Group. The amendments
ensure that the procedures for implementing these actions in a recovery
or wind-down scenario are up-to-date, transparent, and effective such
that responsible parties can act promptly without unnecessary delay.
Moreover, the governance arrangements in the Plans promote the safety
and efficiency of ICC and support the public interest requirements in
Section 17A of the Act \14\ applicable to clearing agencies, and the
objectives of owners and participants, by describing the roles and
responsibilities of relevant stakeholders to ensure that such groups or
individuals are able to discharge their responsibilities. As such, ICC
believes that the proposed rule change is consistent with the
requirements of Rule 17Ad-22(e)(2).\15\
---------------------------------------------------------------------------
\11\ 17 CFR 240.17Ad-22.
\12\ 17 CFR 240.17Ad-22(e)(2).
\13\ 15 U.S.C. 78q-1.
\14\ Id.
\15\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(3)(ii) \16\ requires ICC to establish, implement,
maintain, and enforce written policies and procedures
[[Page 22279]]
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. The Recovery Plan
continues to establish ICC's actions to maintain its viability as a
going concern to address any uncovered credit loss, liquidity
shortfall, capital inadequacy, or business, operational or other
structural weakness that threatens ICC's viability. The Wind-Down Plan
continues to establish how ICC could be wound-down in an orderly manner
should its recovery efforts fail. As described above, the proposed
changes include updates and edits to promote clarity and to ensure that
the information in the Plans is current, such as updated information
regarding financial resources for recovery and wind-down, updated
information regarding recovery tools, including updated procedures for
seeking additional capital from the ICE Group, and updated procedures
for seeking required consultations or approvals in a wind-down
scenario. In ICC's view, such changes would ensure that the Plans
remain useful and effective in a recovery and wind-down scenario. The
proposed rule change would thus promote ICC's ability to carry out a
successful recovery or orderly wind-down, consistent with the
requirements of Rule 17Ad-22(e)(3)(ii).\17\
---------------------------------------------------------------------------
\16\ 17 CFR 240.17Ad-22(e)(3)(ii).
\17\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(15) \18\ requires ICC to establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to identify monitor, and manage ICC's general business risk
and hold sufficient liquid net assets funded by equity to cover
potential general business losses so that ICC can continue operations
and services as a going concern if those losses materialize, including
by (i) determining the amount of liquid net assets funded by equity
based upon its general business risk profile and the length of time
required to achieve a recovery or orderly wind-down, as appropriate, of
its critical operations and services if such action is taken; (ii)
holding liquid net assets funded by equity equal to the greater of
either (x) six months of ICC's current operating expenses, or (y) the
amount determined by the Board to be sufficient to ensure a recovery or
orderly wind-down of critical operations and services of ICC, as
contemplated by the plans established under Rule 17Ad-22(e)(3)(ii);
\19\ and (iii) maintain a viable plan, approved by the Board and
updated at least annually, for raising additional equity should its
equity fall close to or below the amount required under Rule 17Ad-
22(e)(15)(ii).\20\ The Plans continue to analyze ICC's particular
circumstances and risks to ensure that ICC maintains financial
resources necessary to implement both Plans and that ICC remains in
compliance with all regulatory capital requirements. The Plans include
updated information on the financial resources maintained by ICC for
recovery and to support wind-down in compliance with relevant
regulations and include procedures to follow in case of any shortfall.
Such changes continue to ensure that the Plans remain accurate and
useful and that ICC holds sufficient liquid net assets to achieve
recovery or orderly wind-down. As such, ICC believes that the proposed
rule change is consistent with the requirements of Rule 17Ad-
22(e)(15).\21\
---------------------------------------------------------------------------
\18\ 17 CFR 240.17Ad-22(e)(15).
\19\ 17 CFR 240.17Ad-22(e)(3)(ii).
\20\ 17 CFR 240.17Ad-22(e)(15)(ii).
\21\ 17 CFR 240.17Ad-22(e)(15).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed changes to
the Plans will apply uniformly across all market participants. The
changes are being proposed to promote clarity and ensure that the
information provided is current in the Plans. ICC does not believe the
amendments would affect the costs of clearing or the ability of market
participants to access clearing. Therefore, ICC does not believe the
proposed rule change would impose any burden on competition that is
inappropriate in furtherance of the purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#196b6c757c347a7674747c776d6a596a7c7a377e766f"><span class="__cf_email__" data-cfemail="2052554c450d434f4d4d454e5453605345430e474f56">[email protected]</span></a>. Please include
File Number SR-ICC-2022-004 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-ICC-2022-004. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filings will also be available for inspection
and copying at the principal office of ICE Clear Credit and on ICE
Clear Credit's website at <a href="https://www.theice.com/clear-credit/regulation">https://www.theice.com/clear-credit/regulation</a>.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not
[[Page 22280]]
redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-ICC-
2022-004 and should be submitted on or before May 5, 2022.
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-07951 Filed 4-13-22; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 14, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.