Notice2022-16661
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change Relating to the ICE Clear Europe Outsourcing Policy
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Published
August 4, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 149 (Thursday, August 4, 2022)</title>
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[Federal Register Volume 87, Number 149 (Thursday, August 4, 2022)]
[Notices]
[Pages 47809-47811]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-16661]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95394; File No. SR-ICEEU-2022-014]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to the ICE Clear Europe
Outsourcing Policy
July 29, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 19, 2022, ICE Clear Europe Limited filed with the Securities
and Exchange Commission (``Commission'') the proposed rule changes
described in Items I, II, and III below, which Items have been prepared
primarily by ICE Clear Europe. The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing
House'') is submitting its Outsourcing Policy (``Outsourcing Policy''
or ``Policy''), which would set out in a consolidated document how the
Clearing House manages outsourcing arrangements with third party
providers and affiliates of the Clearing House, as well as how the ICE
Clear Europe Board maintains oversight of its outsourcing arrangements.
A copy of the proposed Outsourcing Policy is set forth in Exhibit
5[sic].\3\
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\3\ Capitalized terms used but not defined herein have the
meanings specified in the ICE Clear Europe Clearing Rules and the
Outsourcing Policy.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICE Clear Europe included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. ICE Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICE Clear Europe is submitting its Outsourcing Policy which would
describe, in a consolidated document, the Clearing House's procedures
for management of its outsourcing arrangements. The Outsourcing Policy
would complement the existing ICE Clear Europe Vendor Management Policy
(``VMP''), which describes certain group-wide policies of the Clearing
House's ultimate parent, Intercontinental Exchange, Inc., with respect
to its outsourcing arrangements with third parties. The Outsourcing
Policy also references ICE Clear Europe's Outsourcing Operating Manual
(``OOM''), which sets out additional details concerning the steps it
follows in order to introduce, amend and/or maintain outsourcing
arrangements.
The purpose of the Outsourcing Policy would be to set out, in a
consolidated document, how the Clearing House manages its outsourcing
arrangements, both with third party providers and its affiliates, and
how the Clearing House's Board maintains oversight of the outsourcing
arrangements. Together with the VMP, the Outsourcing Policy is intended
to document how the Clearing House assesses the risks of outsourcing
certain functions. The Policy is not expected to represent a change in
the Clearing House's current practices, but rather to more clearly
document those practices in a Clearing House level policy.
The Outsourcing Policy would include an introduction section which
describes the differences between outsourcing and purchasing services,
the former being the Clearing House's use of a service provider to
perform an ongoing activity that would usually be performed by the
Clearing House and which often involves transferring or sharing related
non-public proprietary information, and the latter being the Clearing
House's purchases of services, goods and facilities and which would
typically not include any transfer of non-public proprietary
information.
The Outsourcing Policy would also differentiate the Clearing
House's outsourcing practices and purchasing arrangements in respect of
third-party providers, which would be managed through the VMP, from
outsourcing through its affiliates, which would typically have a lower
risk profile for the Clearing House because such affiliates tend to be
regulated entities with the same or similar systems, risk appetites,
standards and processes, among other commonalities, as the Clearing
House.
The Policy would set out the Clearing House's overall objectives
when considering outsourcing.
The Policy would include a discussion of outsourcing to third
parties and outsourcing to the Clearing House's affiliates. As
mentioned, outsourcing to third parties is covered under the VMP, which
covers due diligence, risk assessment, suitability, and performance
management, among other topics. Outsourcing to affiliates of the
Clearing House would follow the same process and standards as under the
VMP; however, assessment would be performed by ICE Clear Europe's
senior management rather than the Clearing House's Vendor Management
Office. In all cases, the Clearing House would look to ensure that all
service provider related incidents (such as service interruptions) are
recorded and monitored and escalated to the Clearing House's senior
management in a consistent manner.
The Policy would provide the Clearing House would consider in its
assessment of service providers that there can be lower risk in
outsourcing functions to third parties that are also regulated or
authorized. The Clearing House would consider in its assessment of a
service provider how the service provider's jurisdiction impacts the
risks associated with outsourcing functions to that service providers.
ICE Clear Europe proposes to include in the Policy that it looks to
manage any potential or actual conflicts of interest resulting from its
outsourcing arrangements, particularly in respect of outsourcing
arrangements it has with its affiliates.
Additionally, ICE Clear Europe proposes to include in the Policy
that it looks to reserve independent audit rights to check compliance
with legal and regulatory requirements and policies in its outsourcing
agreements with third party and affiliate service providers, as
required.
ICE Clear Europe also proposes to include in the Policy information
about its cloud-based outsourcing arrangements. Outsourcing to the
cloud is generally covered under the existing VMP. Relevant ICE Clear
Europe and ICE Group policies, such as the Corporate Information
Security Policy would also be considered when
[[Page 47810]]
engaging in cloud outsourcing arrangements. Adding a new or
significantly change an existing cloud outsource arrangement would be
covered under the OOM.
The Policy would include a section describing the Clearing House's
considerations when deciding whether to outsource a function considered
``critical or important''. A function is considered by the Clearing
House to be ``critical or important'' where a defect or failure in its
performance would materially impair the Clearing House's continuing
compliance with the conditions and obligations or its authorizations or
other obligations, financial performance or the soundness or continuity
of its services and activities.
The Policy would include an acknowledgment by the Clearing House
that outsourcing ``critical or important'' functions could impact the
Clearing House's risk profile, ability to oversee the service provider
and manage risks, business continuity measures and performance of its
business activities, to name a few. The Clearing House would ensure
that such matters would be considered in the decision-making processes
in respect of outsourcing. Additionally, ``critical or important''
functions would impact how the Clearing House would assess how an
outsourcing arrangement is assessed, documented and managed by the
Clearing House (including by having an exit plan, if practical). Also,
if a function to be outsourced is or would be a dependency to the
delivery of one or more of the Clearing House's important business
services under its operational resilience framework, such function
would be mapped accordingly with appropriate consideration given to
potential vulnerabilities, resiliency and impact to the relevant impact
tolerances.
The Policy would include a discussion of additional considerations
of particular importance to the Clearing House in light of its position
as a systemically important financial market infrastructure and in
alignment with its regulatory oversight. The Clearing House places
particular importance on the following additional considerations when
considering its outsourcing arrangements, each described in further
detail in the proposed Policy: (i) business continuity arrangements,
(ii) incident management responsiveness and reporting, (iii)
independent assurances, and (iv) redundancies, notice periods and exit
strategies. Regarding business continuity arrangements, during the
onboarding process and through periodic reviews and testing the
Clearing House would assess the service provider's business continuity
plans to ensure that they are fit for the relevant purposes. Next, the
Policy would state that incident management and responsiveness and
timely reporting are important factors in the Clearing House's
outsourcing arrangements, given the services that the Clearing House
operates. Accordingly, the Clearing House would require that
outsourcing providers have appropriate mechanisms for timely response
and incident management. Regarding independent assurances, the Clearing
House would, where possible and practicable, look to collect
independent assurances of the outsourcing providers' services, which
may include but are not limited to SOC2 audits, Regulation SCI audits
and enterprise technology risk assessments. Finally, where possible and
practicable, the Clearing House would look to mitigate the risk of
disruption to its services from outsourcing providers ceasing to
provide their services to the Clearing Houses, through redundancies
(the use of multiple providers), sufficient notice periods, or exit
strategies.
The Policy would also include a section describing ICE Clear
Europe's Board oversight of outsourcing arrangements. The Board
oversees the Clearing House's outsourcing arrangement through risk
appetite metrics that include service and incident reporting,
operational risk reporting that covers typically Priority 3 incidents
or higher, observed in the relevant period, their resolution and other
performance metrics, and an Annual Outsourcing Assessment Report.
The COO or its delegate would prepare the Annual Outsourcing
Assessment Report, which would be reviewed by the Board each year
directly or via its committees. The Annual Outsourcing Assessment
Report would cover the following topics: (i) the activities and
services that are outsourced, (ii) the identities of the outsource
providers (iii) the performance of the outsourcing providers and their
adherence to agreed service levels, (iv) where relevant, the security
measures of the outsourcing providers, (v) risk reviews of the
outsourcing providers, particularly those providing critical or
important cloud outsourcing arrangements, (vi) exit strategies and
contingency arrangements associated with outsourcing critical or
important functions and (vii) results and conclusions of additional
assurance mechanisms (for example, SOC2 audits) where applicable.
Finally, the Policy would describe governance and exception
handling. The document owner would be responsible for ensuring that it
remains up-to-date and reviewed in accordance with the Clearing House's
governance processes. Exceptions to the Policy would also be approved
in accordance with such governance processes. Any deviations from the
Policy would have to be appropriately escalated and reported in a
timely manner by the document owner, and the document owner would also
be responsible for reporting any material breaches or deviations to the
President of ICE Clear Europe and the Risk Oversight Department in
order to determine the appropriate governance escalation and
notification requirements.
(b) Statutory Basis
ICE Clear Europe believes that the Outsourcing Policy is consistent
with the requirements of Section 17A of the Act \4\ and the regulations
thereunder applicable to it. In particular, Section 17A(b)(3)(F) of the
Act \5\ requires, among other things, that the rules of a clearing
agency be designed to promote the prompt and accurate clearance and
settlement of securities transactions and, to the extent applicable,
derivative agreements, contracts, and transactions, the safeguarding of
securities and funds in the custody or control of the clearing agency
or for which it is responsible, and the protection of investors and the
public interest.
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\4\ 15 U.S.C. 78q-1.
\5\ 15 U.S.C. 78q-1(b)(3)(F).
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The Outsourcing Policy is designed to consolidate and document ICE
Clear Europe's existing procedures for considering whether to
outsourcing functions and managing related risks. The Policy would,
among other matters, document the objectives of the Clearing House in
outsourcing responsibilities to various third parties (including
affiliates) and managing related risks, including conflict of interest
risks and legal and regulatory requirements. The Policy would also set
out in detail certain key considerations of the Clearing House in
outsourcing ``critical or important'' functions. In ICE Clear Europe's
view, the Policy will thus facilitate management of the risks related
to outsourcing functions, and thereby promote the efficient operation
and stability of the Clearing House and the prompt and accurate
clearance and settlement of cleared contracts. The enhanced risk
management for outsourcing is therefore also generally consistent with
the protection of investors and the public interest in the
[[Page 47811]]
safe operation of the Clearing House. (ICE Clear Europe would not
expect the adoption of the Policy to affect materially the safeguarding
of securities and funds in ICE Clear Europe's custody or control or for
which it is responsible.) Accordingly, the Policy satisfies the
requirements of Section 17A(b)(3)(F).\6\
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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The Outsourcing Policy is also consistent with relevant provisions
of Rule 17Ad-22.\7\ Rule 17Ad-22(e)(3)(i) provides that ``[e]ach
covered clearing agency shall establish, implement, maintain and
enforce written policies and procedures reasonable designed to, as
applicable [. . .] identify, measure, monitor and manage the range of
risks that arise in or are borne by the covered clearing agency''.\8\
The Outsourcing Policy is intended to document the Clearing House's
practices that relate to management of the Clearing House's outsourcing
functions and builds on the existing VMP. In ICE Clear Europe's view,
as set out above, the Policy would facilitate overall risk management
with respect to outsourcing, consistent with the requirements of Rule
17Ad-22(e)(3)(i).\9\
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\7\ 17 CFR 240.17 Ad-22.
\8\ 17 CFR 240.17 Ad-22(e)(3)(i).
\9\ 17 CFR 240.17 Ad-22(e)(3)(i).
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Rule 17Ad-22(e)(2) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonable designed to, as applicable [. . .] provide for
governance arrangements that are clear and transparent'' \10\ and
``[s]pecify clear and direct lines of responsibility''.\11\ As
discussed, the Outsourcing Policy would clarify certain
responsibilities of the Clearing House Board and COO in relation to
oversight of the Clearing House's outsourcing arrangements. In line
with the Clearing House's other policies and procedures, the Policy
would also describe the responsibilities of the document owner and
appropriate escalation and notification requirements for responding to
exceptions and deviations from the Policy. In ICE Clear Europe's view,
the Policy is therefore consistent with the requirements of Rule 17Ad-
22(e)(2).\12\
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\10\ 17 CFR 240.17 Ad-22(e)(2)(i).
\11\ 17 CFR 240.17 Ad-22(e)(2)(v).
\12\ 17 CFR 240.17 Ad-22(e)(2).
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(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Europe does not believe the Outsourcing Policy would have
any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The Policy is
being adopted to document the Clearing House's practices relating to
management of outsourcing arrangements, both with third parties and
affiliates. The Policy does not change the rights or obligations of
Clearing Members or the Clearing House under the Rules or Procedures.
Accordingly, ICE Clear Europe does not believe that adoption of the
Policy would adversely affect competition among Clearing Members,
materially affect the costs of clearing, adversely the ability of
market participants to access clearing or the market for clearing
services generally, or otherwise adversely affect competition in
clearing services. Therefore, ICE Clear Europe does not believe the
proposed rule change imposes any burden on competition that is not
necessary or appropriate 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 amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any written comments received with respect to the
proposed rule change.
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#a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2"><span class="__cf_email__" data-cfemail="2b595e474e06484446464e455f586b584e48054c445d">[email protected]</span></a>. Please include
File Number SR-ICEEU-2022-014 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICEEU-2022-014. 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 Europe and on ICE
Clear Europe's website at <a href="https://www.theice.com/clear-europe/regulation">https://www.theice.com/clear-europe/regulation</a>.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not 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-ICEEU-2022-014 and should be
submitted on or before August 25, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-16661 Filed 8-3-22; 8:45 am]
BILLING CODE 8011-01-P
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