Notice2023-13219
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
June 22, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 119 (Thursday, June 22, 2023)</title>
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[Federal Register Volume 88, Number 119 (Thursday, June 22, 2023)]
[Notices]
[Pages 40874-40877]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-13219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97734; File No. SR-ICC-2023-007]
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
June 15, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on June
05, 2023, ICE Clear Credit LLC (``ICC'') filed with the Securities and
Exchange Commission (``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.
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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
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.
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\3\ 17 CFR 240.17Ad-22(e)(3)(ii).
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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, ICC 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. 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
[[Page 40875]]
necessitated by credit losses, liquidity shortfalls, losses from
general business risk, or any other losses, consistent with Rule 17ad-
22(e)(3)(ii).\4\ 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.
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\4\ 17 CFR 240.17Ad-22(e)(3)(ii).
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ICC Recovery Plan
Consistent with the regulations applicable to ICC, the ICC 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 coverage amount under the ICC clearing participant (``CP'')
default insurance policy (``CP Default Insurance Policy''),\5\ and the
addition of ICC specific procedures for financial resource
calculations.
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\5\ The CP Default Insurance Policy covers specified losses
resulting from a CP default.
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ICC proposes general updates to ensure that the information in the
ICC 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, 2022, 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> a new ICC membership category--Associate Clearing
Participant in Section IV.B;
<bullet> correction to the Management/Governance chart in Section
IV.C; \6\
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\6\ The BCP and DR Oversight Committee is a sub-committee of the
ICC Compliance Committee. The Management/Governance chart
incorrectly indicated that the BCP and DR Oversight Committee is a
sub-committee of the ICC Audit Committee--and such error has been
corrected.
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<bullet> description of an ICC Independent Director in Section
IV.C;
<bullet> data regarding ICC revenues, volumes, and expenses in
Section IV.D;
<bullet> ICC personnel and facilities in Section VI.A;
<bullet> description of ICC in-house systems in Section VI.A; \7\
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\7\ In connection with a future datacenter migration effort,
ICC's in-house systems were renamed, recategorized and consolidated
in an ICE Group enterprise-wide coordination of all ICE business
applications. As a result of these comprehensive changes in naming
conventions, the December 31, 2021 chart of ICC's in-house systems
in Section VI.A. has been removed and replaced with a new chart of
ICC's current in-house systems that reflect the new names,
categories and updated descriptions.
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<bullet> ICC Counterparty Chart in Section VI.B; \8\
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\8\ The Counterparty Chart has been updated due to the
termination of three reverse repurchase agreements and the addition
of one new reverse repurchase agreement.
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<bullet> contacts under the ICC Default Insurance Policy in Section
VIII.B;
<bullet> coverage amount under the Professional Liability/Cyber
(E&O) Insurance Policy in Section VIII.B;
<bullet> financial resources for recovery in Section X; and
<bullet> ICC and ICE Group financial information in Section VIII
and XI.
Additionally, ICC proposes updates regarding the CP Default
Insurance Policy maintained at the ICE Group level, which may be used
as a recovery tool in a CP default scenario. In Section VIII.B, the ICC
CP Default Insurance Policy coverage amount has increased to $75
million instead of the prior $50 million, to the extent that the
defaulting CP's obligations to ICC exceed the sum of: (1) the
defaulting CP's available margin and Guaranty Fund contributions; and
(2) the ICC ``skin in the game'' contributions to default resources of
$50 million.
Also, in Section VIII.3.iii., ICC proposes to add a footnote
reference to ICC's Risk Appetite Statements and Metrics to describe the
thresholds with respect to regulatory capital requirements that would
trigger alerts for ICC nearing a capital requirement breach (i.e., the
current alert is triggered if ICC maintains 110% or less of its
required regulatory capital). Such reference to ICC's Risk Appetite
Statements and Metrics is intended to provide further details on how
decreases in ICC's regulatory capital will trigger escalation within
ICC which may lead to potential remedial actions, including whether ICC
should initiate its plan to raise additional equity.
In Section X, ICC proposes including additional details regarding
the calculation of ICC's financial resources available for recovery to
reflect new ICC specific Financial Resource Calculation Procedures.
Specifically, ICC completes a voluntary annual calculation of
regulatory requirements under European Market Infrastructure Regulation
(``EMIR'') guidelines.\9\ ICC's calculation approximates the EMIR
requirements and is calculated by ICE Treasury on an annual basis upon
the finalization of ICC's statutory audit and financial statements and
a discussion of future expectations with the ICC Treasury Director. The
EMIR Estimate includes four elements relating to: winding down/
restructuring; operational and legal risks; credit and counterparty
risk/market risk; and business risks. Such procedures include
additional details regarding the calculation of regulatory capital
requirements under EMIR guidelines, which ICC complies with on a
voluntary basis.
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\9\ See EU clearing house regulatory capital requirements as
defined by EMIR under EU Regulation 153/2013.
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ICC proposes additional minor edits for clarity and consistency in
the ICC Recovery Plan. In the counterparty contractual agreements chart
in Section VI, ICC removed the reference to a service no longer
received from a specific external service provider (i.e., receipt of
market data to value FX positions and collateral). In Section XIII,
Appendix G, the applicable contact information on the CP Default
Insurance Policy has been updated. Specifically, the carrier and the
insurance contract policy number has been updated. 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 ICC
Recovery Plan as well as conforming changes in in the ICC Wind-Down
Plan, including updates to entity names, and grammatical and formatting
changes.
ICC Wind-Down Plan
The ICC Wind-Down Plan is designed to establish how ICC could be
wound-down in an orderly manner. ICC proposes corresponding changes to
the ICC 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 the addition of ICC specific
procedures for financial resource calculations.
ICC proposes general updates to ensure that the information in the
ICC 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, 2022, unless otherwise stated. The proposed
revisions ensure
[[Page 40876]]
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> correction to the Management/Governance chart in Section
IV.B; \10\
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\10\ The BCP and DR Oversight Committee is a sub-committee of
the ICC Compliance Committee. The Management/Governance chart
incorrectly indicated that the BCP and DR Oversight Committee is a
sub-committee of the ICC Audit Committee--and such error has been
corrected.
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<bullet> description of an ICC Independent Director in Section
IV.B;
<bullet> ICC revenues in Section VII.A;
<bullet> ICC personnel and facilities in Section VII.C;
<bullet> description of ICC in-house systems in Section VII.C; \11\
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\11\ In connection with a future datacenter migration effort,
ICC's in-house systems were renamed, recategorized and consolidated
in an ICE Group enterprise-wide coordination of all ICE business
applications. As a result of these comprehensive changes in naming
conventions, the December 31, 2021 chart of ICC's in-house systems
in Section VII.C. has been removed and replaced with a new chart of
ICC's current in-house systems that reflect the new names,
categories and updated descriptions.
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<bullet> ICC Counterparty Chart VII.D; \12\ and
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\12\ The Counterparty Chart has been updated due to the
termination of three reverse repurchase agreements and the addition
of one new reverse repurchase agreement.
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<bullet> financial resources to support wind-down in Section IX.
ICC also proposes including additional details regarding the
calculation of ICC's financial resources available for wind-down to
reflect the new ICC specific Financial Resource Calculation Procedures.
Such procedures include additional details regarding the calculation of
regulatory capital requirements under EMIR guidelines, which ICC
complies with on a voluntary basis.
ICC proposes additional updates and edits to promote clarity and
consistency in the ICC Wind-Down Plan. In the counterparty contractual
agreements chart in Section VIII, ICC removed the reference to a
service no longer received from a specific external service provider
(i.e., receipt of market data to value FX positions and collateral). 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 \13\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\14\ In particular, Section 17A(b)(3)(F) of the Act \15\
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.
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\13\ 15 U.S.C. 78q-1.
\14\ 17 CFR 240.17Ad-22.
\15\ 15 U.S.C. 78q-1(b)(3)(F).
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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. 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.\16\
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\16\ Id.
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Rule 17Ad-22(e)(3)(ii) \17\ requires ICC to establish, implement,
maintain, and enforce written policies and procedures 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 ICC 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 ICC 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.
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).\18\
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\17\ 17 CFR 240.17Ad-22(e)(3)(ii).
\18\ Id.
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Rule 17Ad-22(e)(15) \19\ 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)
\20\; and (iii) maintain a viable plan, approved by the Board and
updated at least annually, for raising additional equity should its
equity fall
[[Page 40877]]
close to or below the amount required under Rule 17ad-
22(e)(15)(ii).\21\
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\19\ 17 CFR 240.17Ad-22(e)(15).
\20\ 17 CFR 240.17Ad-22(e)(3)(ii).
\21\ 17 CFR 240.17Ad-22(e)(15)(ii).
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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).\22\
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\22\ 17 CFR 240.17Ad-22(e)(15).
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(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
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1260677e773f717d7f7f777c6661526177713c757d64"><span class="__cf_email__" data-cfemail="aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc">[email protected]</span></a>. Please include
file number SR-ICC-2023-007 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-2023-007. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 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>.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-ICC-2023-007 and should
be submitted on or before July 13, 2023.
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,
Deputy Secretary.
[FR Doc. 2023-13219 Filed 6-21-23; 8:45 am]
BILLING CODE 8011-01-P
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