Notice2024-29037
Self-Regulatory Organizations; ICE Clear Credit LLC; Order Granting Accelerated Approval of Proposed Rule Change Relating to the ICC Operational Risk Management Framework
Primary source
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Published
December 11, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 238 (Wednesday, December 11, 2024)</title>
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[Federal Register Volume 89, Number 238 (Wednesday, December 11, 2024)]
[Notices]
[Pages 99949-99954]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-29037]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101819; File No. SR-ICC-2024-011]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Granting Accelerated Approval of Proposed Rule Change Relating to the
ICC Operational Risk Management Framework
December 5, 2024.
I. Introduction
On November 13, 2024, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (the ``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change (hereafter,
``Proposed Rule Change'') to revise the Operational Risk Management
Framework (``ORMF''). The Proposed Rule Change was published for
comment in the Federal Register on November 19, 2024.\3\ The Commission
has not received comments regarding the Proposed Rule Change. For the
reasons discussed below, the Commission is approving the Proposed Rule
Change on an accelerated basis.
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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 ICC Operational
Risk Management Framework; Securities Exchange Act Release No. 34-
101603 (Nov. 13, 2024), 89 FR 91443 (Nov. 19, 2024) (SR-ICC-2024-
011) (``Notice'').
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II. Description of the Proposed Rule Change
ICC is registered with the Commission as a clearing agency for the
purpose of clearing Credit Default Swap (``CDS'') contracts.\4\ In its
role as a CDS clearing agency, ICC faces operational risks stemming
from the breakdown of systems and processes that that would impair
ICC's ability to complete settlements or ICC's internal business
operations. The ORMF outlines ICC's risk assessment and oversight
program, which aims to address such operational risks, including by
reducing operational incidents, encouraging process and control
improvement, bringing transparency to operational performance standard
monitoring, and fulfilling regulatory obligations. The ORMF also
explains how ICC vets and manages service agreements with providers
covering various aspects of ICC's operations. According to ICC, one of
the purposes of the Proposed Rule Change
[[Page 99950]]
is to align the ORMF with the requirements of Rule 17Ad-25(i) under the
Act,\5\ primarily by adding to the ORMF details about ICC's
relationships with service providers.\6\ Further changes in the ORMF
would be included to more clearly describe ICC's risk mitigation
process and technology control functions, among other revisions.
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\4\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in ICC Rules and the ORMF, as applicable.
\5\ See generally Securities Exchange Act Release No. 98959
(Nov. 16, 2023), 88 FR 84454 (Dec. 5, 2023) (File No. S7-21-22)
(``Clearing Agency Governance and Conflicts of Interest'').
\6\ See Notice, 89 FR at 91443.
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A. Management of Risks From Service Providers for Core Services
The Proposed Rule Change would amend the ORMF primarily by adding
new Section II.B., titled ``Management of Risks from Relationships with
Service Providers for Core Services,'' which would describe ICC's
vetting and management processes regarding any service provider for
critical services (``SPCS'').\7\ The new section would require ICC's
senior management to:
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\7\ A service provider for core services means any person that,
through a written services provider agreement for services provided
to or on behalf of the registered clearing agency, on an ongoing
basis, directly supports the delivery of clearance or settlement
functionality or any other purposes material to the business of the
registered clearing agency. 17 CFR 240.17Ad-25(a). ICC's ORMF has
adopted the same terminology and meaning of SPCS as Rule 17Ad-25(a).
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(1) Evaluate and document the risks related to an agreement with a
SPCS, including under changes to circumstances and potential
disruptions, and whether the risks can be managed in a manner
consistent with the ORMF;
(2) Submit to the ICC Board of Managers (``Board'') for review and
approval any agreement that would establish a relationship with a SPCS,
along with the above-mentioned risk evaluation;
(3) Be responsible for establishing the policies and procedures
that govern relationships and manage risks related to such agreements
with a SPCS (while the Board would be required to be responsible for
reviewing and approving such policies and procedures); and
(4) Perform ongoing monitoring of the relationship, and report to
the Board for its evaluation of any action taken by senior management
to remedy significant deterioration in performance or address changing
risks or material issues identified through such monitoring; or if the
risks or issues cannot be remedied, to assess and document weaknesses
or deficiencies in the relationship with the service provider for
submission to the Board.
The Proposed Rule Change would introduce a two-pronged assessment
approach when identifying and managing ICC's relationships with a SPCS,
differentiating between internal and external service providers.
Under the first prong, ICC would conduct an assessment of internal
service providers. Currently, ICC engages only one internal service
provider: ICC's parent company, Intercontinental Exchange, Inc.
(``ICE'').\8\ ICE is a SPCS because, pursuant to written service
agreements, it provides core services to ICC that directly support the
delivery of clearance and settlement functionality or other purposes
material to ICC's business as a registered clearing agency. ICE
provides business services such as staffing, finance, and accounting
pursuant to a Master Services Agreement between ICC and ICE, and
provides clearing and settlement-specific services to ICC pursuant to a
Clearing Settlement Services Agreement (``CSSA''). The CSSA specifies
that ICE provides clearing and settlement services pursuant to certain
of ICE's ``Key Policies.'' \9\ Each Key Policy sets forth its purpose
and is applicable to all ICE and ICC employees impacted by such policy.
Further, the CSSA provides for a governance structure (set forth in
more detail in ICE's Technology Planning and Governance Policy) whereby
the Key Policies may only be amended by ICE's Operational Oversight
Committee (``OOC'') which includes representatives of both ICE and ICC.
The OOC acts as the forum to discuss changes and improvements to the
services provided to ICC by ICE. Further, changes to any Key Policy may
not take effect until they have been approved by the OOC and any
material proposed changes to the Key Policies are subject to a veto by
ICC.
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\8\ See Notice, 89 FR at 91444.
\9\ ICE's Key Policies include the following, which may be
updated from time to time: 1. Technology Planning and Governance
Policy; 2. Capacity Planning Policy; 3. Change Management Policy; 4.
Corporate Business Continuity Policy; 5. Corporate Information
Security Policy; 6. Corporate Information Technology Policy; 7.
Corporate Physical Security Policy; 8. Disaster Recovery Policy; 9.
Enterprise Risk Management Policy; 10. Incident Management Policy;
11. Information Technology Asset Management Policy; 12.
Infrastructure Observability Policy; 13. Software Development
Lifecycle Policy; 14. Third Party Risk Management Policy.
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Under the second prong, ICC would conduct an assessment of external
service providers, utilizing ICC's External Service Provider Assessment
process. This process would be outlined in Section II.C. of the ORMF
and in ICE's Third Party Risk Management (``TPRM'') program, which is
applicable to ICC as a subsidiary of ICE. Further, with respect to
ICC's Financial Service Providers \10\ that are identified as SPCSs,
ICC utilizes its Counterparty Monitoring Procedures. ICC's External
Service Provider Assessment process is supplemental to ICE's TPRM
program, which applies to external vendors and suppliers, service
providers, and contractors/consultants of ICE and its subsidiaries,
including ICC. The TPRM program establishes a comprehensive and
structured approach for assessing, managing, monitoring, and governance
of third-party risks at ICE and its subsidiaries, including ICC. It
requires an assessment of operations and resiliency through, among
other things, completion of initial on-boarding assessments of the
third party's viability and capability to meet expected deliverables,
business objectives, and compliance with contractual obligations,
followed by ongoing monitoring.
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\10\ Financial service providers (``FSPs'') are not covered by
the TPRM program. FSPs, as defined in ICC's Counterparty Monitoring
Procedures, are the entities to which ICC has actual or potential
credit exposure, e.g., settlement banks, custodians, depositories,
reverse repurchase agreement (``repo'') counterparties, committed
repo counterparties, and committed foreign exchange (``FX'')
counterparties.
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The Proposed Rule Change would update vocabulary around and clarify
the description of ICC's external service provider assessments in newly
renumbered Section II.C of the ORMF. As proposed, this section would no
longer refer to ``critical vendors,'' \11\ but would instead use the
term ``external SPCS'' to align the ORMF with Rule 17Ad-25 under the
Exchange Act, which uses and defines the term ``service provider for
core services.'' \12\ Currently, Section II.C provides that external
service providers are reviewed and evaluated for re-approval based on
ICC's current risk ranking system, which is based on ``tiers.'' Under
the Proposed Rule Change, Section II.C. would no longer describe the
re-approval process for such external service providers with a ``risk
ranking'' system based on ``tiers'' but would instead use a system of
``risk ratings.'' Despite the terminology change, the basic review
methodology would not. Under the Proposed Rule Change, ICC would still
assign the risk rating based on a schedule of risk assessments divided
into low, moderate, and high risks, that considers the risk direction
for strategic, reputational, compliance, legal and operational risk
[[Page 99951]]
presented by the external service provider, in the same way that ICC
currently assigns risk rankings.
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\11\ Currently the ORMF defines a ``critical vendor'' as any
third party service which is deemed essential to complete ICC's core
processes. Core processes means acceptance of new trades, management
of positions, production of risk and banking reports, and the
movement of funds.
\12\ See 17 CFR 240.17Ad-25(a).
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Thus, when assessing an external SPCS, ICC would continue to
analyze and manage risks posed by such external service providers,
including strategic, reputational, compliance, legal, and operational
risk, in the same manner as under the current ORMF. Similarly, ICC
would use existing concepts when performing assessments of an external
SPCS. As noted above, ICC is replacing the term ``critical vendor''
with the term ``external SPCS.'' ICC also is replacing the term ``core
processes'' with the term ``CDS core clearing services.'' Currently, a
critical vendor is any third party service provider which is deemed
essential to complete ICC's core processes, which include acceptance of
new trades, management of positions, production of risk and banking
reports, and the movement of funds. The definition of external SPCS
would include external service providers for core services, including
CDS core clearing services, which would continue to include acceptance
of new trades, management of positions, production of risk and banking
reports, and the movement of funds.
Similarly, risk assessments are and would continue to be completed
as part of the initial onboarding process, as well as periodically.
Section II.C. would clarify that ICC's assessment of an external SPCS
would be in addition to ICE's TPRM program, which applies to any
external vendor or supplier, service provider, and contractors and
consultants utilized by ICE or its subsidiaries, including ICC.
Although ICC's Business Continuity Planning and Disaster Recovery
programs Oversight Committee (``BDOC'') will continue to be the body
performing these assessments, proposed Section II.C. would eliminate
the current bullet point list of items that may be included in the risk
assessments \13\ and replace it with the requirement to ``evaluate and
document the risks related to an agreement with the external SPCS,
including under changes to circumstances and potential disruptions, and
whether the risks can be managed in a manner consistent with the
ORMF,'' thus mirroring the language found in Rule 17Ad-25(i)(1) under
the Act.\14\ Although the BDOC will continue to review and recommend
approval of the inventory of ICC external SPCSs and to assign risk
ratings to the risk assessments in order to determine the frequency of
ongoing risk assessment reviews, Section II.C. would be updated to
state that the risk ratings will take into consideration ICC's plan to
complete core processing if the service is unavailable. Additionally,
Section II.C. would state explicitly that the BDOC reviews and
recommends that the ICC Compliance Committee (``Compliance Committee'')
approve the inventory of ICC external SPCS.\15\
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\13\ Currently, the BDOC is responsible for conducting a service
provider risk assessment for each critical vendor, which includes:
<bullet> Profiling critical vendor and services performed;
<bullet> Reviewing performance activity to date, if applicable;
<bullet> Validating or enhancing the contingency plan in the
event that a critical vendor cannot perform as expected;
<bullet> Ensuring an ongoing oversight program of the critical
vendor;
<bullet> Assessing the varying risks posed by the critical
vendor.
\14\ 17 CFR 240.17Ad-25(i)(1); see also Notice, 89 at 91444.
\15\ The ICC Compliance Committee is an internal ICC committee
that oversees and manages ICC's compliance program that establishes
the framework for identifying, assessing, measuring, monitoring,
mitigating, and reporting on compliance risks for ICC.
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B. Further Changes to the ORMF
In addition to the above-described changes, which primarily address
consistency with Rule 17Ad-25(i) under the Act,\16\ the Proposed Rule
Change would:
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\16\ 17 CFR 240.17Ad-25(i).
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<bullet> amend the `Introduction' section of the ORMF to provide
uniform abbreviations to existing defined terms, which ICC believes
will enhance the clarity and readability of the ORMF; \17\
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\17\ See Notice, 89 at 91444.
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<bullet> amend terms within the `Operational Risk Lifecycle' chart
of Section I of the ORMF to ensure that it accurately reflects the
description of the operational life cycle narrative and correct
typographical errors; and
<bullet> revise Section II., `Operational Risk Focus Areas,' to
update ICC's reference to certain functions performed by ICE, remove
references to such functions being ``outsourced,'' and instead note
that the functions are described in the ORMF and performed pursuant to
services agreements between ICC and ICE.
The Proposed Rule Change would amend Section II.A., `Business
Continuity Planning and Disaster Recovery,' to more clearly describe
the steps in the collaboration process with respect to the business
impact analysis (``BIA'') process. The proposed changes would reorder
and restate the steps for completing BIA surveys used in creating test
plans. Currently, the ORMF states that ICC ensures that it can recover
from a wide-scale disruption and collaborates with each department to
complete BIA surveys--specifically to ensure that each critical
business unit:
<bullet> Defines the Mission Critical Tasks (``MCT'') to be
performed;
<bullet> Creates test plans to ensure recovery staff are properly
trained;
<bullet> Performs periodic tests to validate recovery staff's
ability to perform MCT; and
<bullet> Reports the results of testing to document successes, and
detail corrective actions.
As proposed, the first two bullet points would be deleted and
replaced with:
<bullet> Identifies ICC business processes, as well as the
associated criticality of these business process, by performing the
BIA; [and]
<bullet> Creates Business Continuity Plans (BCPs) for those
processes identified in the BIA.
The third and fourth bullet points would remain the same, except
the third bullet point would specify that the periodic tests would be
those of BCPs and that, since the MCT acronym would no longer apply, a
reference would be made to mission critical tests.\18\
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\18\ Id.
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The Proposed Rule Change also would revise Section II.F. of the
ORMF (previously Section II.E.), `Technology Control Functions,'
specifically to more accurately reflect the ICC Technology Department's
responsibilities. Section II.F would be updated to specify that the ICC
Technology Department is responsible for end-to-end design,
development, testing, deployment, maintenance and day-to-day operations
of all enterprise software systems needed for ICC core functions.
Currently, the ORMF describes the Technology Department's
responsibilities as risk analysis and oversight of systems operations,
systems development/quality assurance and capacity/performance
planning. The ORMF would be revised to state that ICC's Technology
Department is responsible for end-to-end design, development, testing,
deployment, maintenance, and day-to-day operations of enterprise
software systems needed for ICC core functions of CDS clearing. In
addition, the Proposed Rule Change would update an outdated reference
to ICC's Credit Technology Delivery Method (``CTDM''), which is a
separate policy from the ORMF. Currently the ORMF references the ICC
Project Delivery Policy, which is the former title of the CTDM. Those
references would be updated to refer to the CTDM instead. Similarly, in
connection with a
[[Page 99952]]
discussion of how technology releases are assessed, the Proposed Rule
Change would replace a current reference to the ICC technology director
with a reference to the ICC Technology leadership team. This change
would more accurately reflect that technology releases are assessed by
the entire ICC Technology leadership team, not just the ICC technology
director.
Next, the Proposed Rule Change would amend Appendix 1 of the ORMF
to include the titles of the relevant regulatory requirements while
removing the existing summaries of such regulations. ICC indicated that
the purpose of this change is to streamline the reference process to
provide the reader with a more direct reference to all the applicable
regulations and avoid the need to review and update summaries of
applicable regulations as they are amended from time to time.\19\
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\19\ Id.
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Lastly, the Proposed Rule Change would update the `Revision
History' section of the ORMF to reflect the proposed changes described
above, as well as to formalize a series of non-material updates
previously made to the ORMF that were the output of the annual review
of the ORMF conducted by the Compliance Committee, and that were
reviewed and approved by the Board in 2021, 2022, and 2023.\20\
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\20\ For example, updates approved by the Board in 2021 included
language in Section I.A. `Risk Assessment,' clarifying that the
Compliance Committee reviews risk assessments during their quarterly
meetings. The 2021 updates also included minor clarifications to
Section I.B. to clarify that one of the current responsibilities of
the ICE Enterprise Risk Management (``ERM'') function is to observe
and review the incident management mitigation process and, if
necessary, challenge corrective action plan decisions and priority
levels. See Notice, 89 at 91444-45. ICC indicated that these changes
were intended to clarify the description of current practices and
the readability of the ORMF, and as such, do not change current
practices. Id. For further examples, see Notice, 89 at 91444-45.
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III. Discussion
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
the Proposed Rule Change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to such
organization.\21\ Under the Commission's Rules of Practice, the
``burden to demonstrate that a proposed rule change is consistent with
the Act and the rules and regulations issued thereunder . . . is on the
self-regulatory organization [`SRO'] that proposed the rule change.''
\22\
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\21\ 15 U.S.C. 78s(b)(2)(C).
\22\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and specific
to support an affirmative Commission finding,\23\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Act and the applicable rules and
regulations.\24\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\25\
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\23\ Id.
\24\ Id.
\25\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017) (``Susquehanna'').
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After carefully considering the Proposed Rule Change, the
Commission finds that the Proposed Rule Change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to ICC. More specifically, for the reasons discussed below,
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act \26\ and Rules 17Ad-25(i),\27\ 17Ad-22(e)(17)(i),\28\ and 17Ad-
22(e)(2)(i) and (v) \29\ thereunder.
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\26\ 15 U.S.C. 78q-1(b)(3)(F).
\27\ 17 CFR 240.17Ad-25(i).
\28\ 17 CFR 240.17Ad-22(e)(17)(i).
\29\ 17 CFR 240.17Ad-22(e)(2)(i), (v).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) 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.\30\
Based on a review of the record, and for the reasons discussed below,
the proposed changes to the ORMF are consistent with the promotion of
the prompt and accurate clearance and settlement of transactions at
ICC.
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\30\ 15 U.S.C. 78q-1(b)(3)(F).
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Newly added Section II.B. of the ORMF--addressing ICC's management
of risks from relationships with SPCS--and updated and renumbered
Section II.C. of the ORMF--titled `External Service Provider
Assessments'--help facilitate ICC's ability to manage its relationships
with SPCS and the inherent risks these relationships encompass. For
instance, as discussed above, the Proposed Rule Change would add
Section II.B. to the ORMF, which would specify the requirements and
procedures for ICC to manage the risks arising from ICC's relationships
with SPCS. Such requirements and procedures would include, among other
things, evaluating and documenting risks associated with a SPCS,
submitting a risk evaluation to the ICC Board related to a relationship
with a SPCS, establishing policies and procedures governing the
relationship and risk-management of a SPCS relationship, and performing
ongoing monitoring of a SPCS relationship for purposes of identifying
and remediating changing risks.\31\ Together, Sections II.B. and II.C.
of the ORMF also would provide greater clarity around the approval and
maintenance of ICC's relationships with SPCS that are contractually
obligated not only to supply services material to running ICC's
business, such as staffing, finance, and accounting, but also to
support ICC's clearance and settlement functionality. By promoting
ICC's ability to manage relationships with SPCS, both internal and
external, the Proposed Rule Change is thereby designed to promote ICC's
capabilities in promptly and accurately clearing and settling
securities transactions, and, to the extent applicable, derivative
agreements, contracts, and transactions.
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\31\ The requirements outlined in Section II.B. directly reflect
language in Rule 17Ad-25(i), which was approved by the Commission in
2023. See n. 5, supra.
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For the reasons stated above, the Commission finds that the
Proposed Rule Change is consistent with Section 17A(b)(3)(F) of the
Act.\32\
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\32\ Id.
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B. Consistency With Rule 17Ad-25(i) Under the Act
Rule 17Ad-25(i) requires each covered clearing agency to establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to (1) require senior management to evaluate and
document the risks related to an agreement with a service provider for
core services, including under changes to circumstances and potential
disruptions, and whether the risks can be managed in a manner
consistent with the clearing agency's risk management framework; (2)
require senior management to submit to the board of directors for
review and approval any agreement that would establish a relationship
with a service provider for core services, along with such risk
evaluation; (3) require senior management to be responsible for
establishing the policies and procedures that govern relationships and
manage
[[Page 99953]]
risks related to such agreements with service providers for core
services and require the board of directors to be responsible for
reviewing and approving such policies and procedures; and (4) require
senior management to perform ongoing monitoring of the relationship,
and report to the board of directors for its evaluation of any action
taken by senior management to remedy significant deterioration in
performance or address changing risks or material issues identified
through such monitoring; or if the risks or issues cannot be remedied,
require senior management to assess and document weaknesses or
deficiencies in the relationship with the service provider for
submission to the board of directors.\33\ In adopting Rule 17Ad-25(i),
the Commission stated that the final rule would more clearly delineate
the roles of senior management and the board so as not to require the
board to undertake responsibilities reserved for senior management.\34\
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\33\ 17 CFR 240.17Ad-25(i).
\34\ See Clearing Agency Governance and Conflicts of Interest,
88 FR at 84477.
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As described above, the Proposed Rule Change would help ensure that
the ORMF codifies and implements policies and procedures designed to
ensure that ICC appropriately manages relevant risks that arise from
ICC's relationships with SPCS, including by increasing ORMF users'
awareness of those risks, and ensuring that ICC identifies, assesses,
measures, monitors, mitigates, and reports those risks. The ORMF also
delineates the responsibilities between senior management and the Board
regarding these risks. Specifically, the ORMF specifies that senior
management provides the Board with information pertaining to
relationships with SPCS, any relevant risk evaluations, and
management's efforts to monitor, assess, document, and remedy risks
associated with these relationships.
For these reasons, the Commission finds the Proposed Rule Change is
consistent with Rule 17Ad-25(i).\35\
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\35\ Id.
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C. Consistency With Rule 17Ad-22(e)(17)(i) Under the Act
Rule 17Ad-22(e)(17)(i) requires each covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to manage its operational risks by
identifying the plausible sources of operational risk, both internal
and external, and mitigating their impact through the use of
appropriate systems, policies, procedures, and controls.\36\
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\36\ 17 CFR 240.17Ad-22(e)(17)(i).
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As described above, the Proposed Rule Change would update the ORMF
to provide additional and current details regarding ICC's management of
SPCS and assure that both ICC's relationships with SPCS and the risks
associated with those relationships are continuously being monitored.
The processes specified in the ORMF are intended to enhance ICC's
ability to identify relevant internal and external sources of
operational risk. As such, the Proposed Rule Change will define
processes and controls that will facilitate ICC's ability to mitigate
the impact of such risks through the use of appropriate systems,
policies, procedures, and controls, consistent with the requirements of
Rule 17Ad-22(e)(17)(i).\37\
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\37\ Id.
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For the reasons stated above, the Commission finds the Proposed
Rule Change is consistent with Rule 17Ad-22(e)(17)(i).\38\
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\38\ Id.
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D. Consistency With Rule 17Ad-22(e)(2)(i) and (v) Under the Act
Rule 17Ad-22(e)(2)(i) and (v) requires each covered clearing agency
to establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for governance arrangements
that are clear and transparent, and specify clear and direct lines of
responsibility.\39\
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\39\ 17 CFR 240.17Ad-22(e)(2)(i), (v).
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As described above, by adding new Section II.B. to the ORMF, the
Proposed Rule Change would codify the responsibilities of ICC's
management and the Board when managing risks arising from ICC's
relationships with SPCS. The proposed changes also would update the
ORMF to clarify the description of the Compliance Committee and ERM
responsibilities, and the general updates described in Section II.B.
above, would help ensure that the ORMF is accurate and current. Taken
together, these revisions to the ORMF will help ICC maintain clear and
transparent governance arrangements and specify clear and direct lines
of responsibility, which in turn will help improve the accuracy and
transparency of ICC's governance arrangements and improve the clarity
of the lines of responsibility.
For these reasons, the Commission finds the Proposed Rule Change is
consistent with Rule 17Ad-22(e)(2)(i) and (v).\40\
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\40\ Id.
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IV. Accelerated Approval of the Proposed Rule Change
Under Section 19(b)(2) of the Act,\41\ the Commission may approve a
proposed rule change prior to the 30th day after the date of
publication of notice of filing of the proposed rule change in the
Federal Register if the Commission finds good cause for doing so.
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\41\ 15 U.S.C. 78s(b)(2).
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The Commission finds good cause, pursuant to Section 19(b)(2) of
the Exchange Act,\42\ to approve the Proposed Rule Change prior to the
30th day after the date of publication of notice of filing of the
Proposed Rule Change in the Federal Register. Rule 17Ad-25(i) requires,
among other things, that covered clearing agencies establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to require that senior management (i) evaluate and
document the risks related to an agreement with a SPCS; (ii) submit to
the board of directors for review and approval any agreement that would
establish a relationship with a SPCS (iii) be responsible for
establishing the policies and procedures that govern relationships and
manage risks related to such agreements with SPCS; and (iv) perform
ongoing monitoring of the relationship, and report to the board of
directors for its evaluation of any action taken by senior management
to remedy significant deterioration in performance or address changing
risks or material issues identified through such monitoring.\43\ The
proposed rule change would establish ICC's process for vetting and
managing its relationships with SPCS, with specific processes for
internal and external SPCS, consistent with Rule 17Ad-25(i).\44\ Based
on the foregoing, and as discussed above, the Proposed Rule Change is
consistent with the requirements of Rule 17Ad-25(i) under the Act.\45\
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\42\ 15 U.S.C. 78s(b)(2).
\43\ 17 CFR 240.17Ad-25(i).
\44\ 17 CFR 240.17Ad-25(i).
\45\ Id.
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The compliance date for Rule 17Ad-25(i) generally is December 5,
2024.\46\ Approving the Proposed Rule Change on an accelerated basis
will allow ICC to establish its process for vetting and managing its
relationships with SPCS by this compliance date. Accordingly, the
Commission finds good cause to
[[Page 99954]]
approve the Proposed Rule Change on an accelerated basis prior to the
30th day after the date of publication of notice of filing of the
Proposed Rule Change in the Federal Register, pursuant to Section
19(b)(2) of the Exchange Act.\47\
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\46\ Clearing Agency Governance and Conflicts of Interest, 88 FR
at 84454 (explaining that the compliance date for Rule 17Ad-25 is
December 5, 2024, except that the compliance date for the
independence requirements of the board and board committees in Rules
17Ad-25(b)(1), (c)(2), and (e) is December 5, 2025).
\47\ 15 U.S.C. 78s(b)(2).
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V. 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 \48\ and Rules 17Ad-25(i),\49\ 17Ad-22(e)(17)(i),\50\ and 17Ad-
22(e)(2)(i) and (v) \51\ thereunder.
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\48\ 15 U.S.C. 78q-1(b)(3)(F).
\49\ 17 CFR 240.17Ad-25(i).
\50\ 17 CFR 240.17Ad-22(e)(17)(i).
\51\ 17 CFR 240.17Ad-22(e)(2)(i), (v).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\52\ that the Proposed Rule Change (SR-ICC-2024-011), be, and hereby
is, approved, on an accelerated basis.\53\
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\52\ 15 U.S.C. 78s(b)(2).
\53\ 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.\54\
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\54\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29037 Filed 12-10-24; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on December 11, 2024.
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.