[Federal Register Volume 86, Number 47 (Friday, March 12, 2021)]
[Notices]
[Pages 14163-14165]
[FR Doc No: 2021-05133]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91279; File No. SR-ICC-2021-003]

Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the ICC Operational Risk
Management Framework

March 8, 2021.

I. Introduction

    On January 21, 2021, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change notice to
revise the ICC Operational Risk Management Framework.\3\ The proposed
rule change was published for comment in the Federal Register on
February 5, 2021.\4\ The Commission did not receive comments regarding
the proposed rule change. For the reasons

discussed below, the Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Capitalized terms used but not defined herein have the
meanings specified in ICC's Clearing Rules.
    \4\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Proposed Rule Change Relating to the ICC Operational Risk
Management Framework, Exchange Act Release No. 91024 (February 1,
2021); 86 FR 8447 (February 5, 2021) (SR-ICC-2021-003) (``Notice'').
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II. Description of the Proposed Rule Change

    ICC is proposing to revise its Operational Risk Management
Framework to incorporate reference to the Intercontinental Exchange,
Inc. (``ICE, Inc.'') Enterprise Risk Management Policy (``ERM Policy'')
and to ICC's status as a covered clearing agency and the relevant rules
applicable to ICC as a covered clearing agency relating to operational
risk requirements, namely Rules 17Ad-22(e)(17) and (21) under the
Act.\5\
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    \5\ 17 CFR 240.17Ad-22(e)(17) and (21).
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    The proposal would make updates to the risk assessment process in
the Operational Risk Management Framework, which addresses identifying,
assessing, monitoring, and mitigating plausible sources of operational
risk.\6\ Under the ``identify'' component, the proposal would use the
more general term ``risk-based assessment methodology,'' to replace use
of the term ``risk-scenario-based assessment methodology.'' \7\ ICC
proposes similar changes throughout the ``assess'' component to replace
``risk scenarios'' with ``risks.'' \8\ The proposed changes also cross
reference the Enterprise Risk Management Policy (``ERM Policy''),
noting that the ICE, Inc. Enterprise Risk Management Department
(``ERM'') maintains an inventory of material risks faced by ICC.\9\
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    \6\ Notice, 86 FR at 8447.
    \7\ Id.
    \8\ Id.
    \9\ Id. The ICE, Inc. Enterprise Risk Management Department
(``ERM'') provides the oversight and framework for identifying,
assessing, managing, monitoring and reporting on risk across the
ICE, Inc.'s various business units, including ICC. ERM, in
conjunction with relevant ICC individuals, oversees the management
of this Operational Risk Management Framework.
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    Further, under the ``assess'' component, ICC proposes to
incorporate the ERM Policy and its relevant risk assessment
guidelines.\10\ ICC also proposes additional information relating to
the determination of risk ratings for identified risks.\11\ With
respect to the ``mitigate'' component, the proposed changes cross-
reference relevant guidelines in the ERM Policy and include minor
updates regarding documenting output and reviewing risk
assessments.\12\ The proposed changes also update the ``report''
component to more clearly state that ERM is responsible for operational
risk reporting to appropriate parties.\13\
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    \10\ Notice, 86 FR at 8447-8448.
    \11\ Notice, 86 FR at 8448.
    \12\ Id.
    \13\ Id.
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    Appendix 1 of the Operational Risk Management Framework summarizes
relevant regulatory requirements and industry guidance applicable to
ICC. The proposal would revise appendix 1 to reference ICC's status as
a covered clearing agency and to update relevant regulations applicable
to ICC as a covered clearing agency relating to operational risk,\14\
namely Rules 17Ad-22(e)(17) and (21).\15\
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    \14\ Id.
    \15\ 17 CFR 240.17Ad-22(e)(17) and (21).
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III. Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization.\16\ For the reasons given below, the Commission finds
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act \17\ and Rule 17Ad-22(e)(17)(i) thereunder.\18\
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    \16\ 15 U.S.C. 78s(b)(2)(C).
    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ 17 CFR 240.17Ad-22(e)(17)(i).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions, to
assure the safeguarding of securities and funds which are in the
custody or control of ICC or for which it is responsible, and, in
general, to protect investors and the public interest.\19\
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed above, the proposed rule change would amend the
Operational Risk Management Framework to explicitly reference the ICE,
Inc. ERM Policy and the role that the ERM plays in establishing
guidelines for operational risk management. In particular, the proposed
rule change would state that the ICE, Inc. ERM Policy provides the Risk
Assessment guidelines, including how ICC rates, identifies and
mitigates various risks.
    Additionally, the proposed rule change updates Appendix 1 of the
Operational Risk Management Framework to state that ICC is a
``covered'' clearing agency and that it is subject to Rules 17Ad-
22(e)(17) and (21), which require policies and procedures designed to
manage operational risk.
    As described above, the proposal would update the ICC Operational
Risk Management Framework to note with more specificity ERM's role in
ICC's operational risk management and to reference the ERM Policy as a
source of information for such things as an inventory of material risks
faced by ICC. With these changes, the Commission believes that ICC's
Risk Management Framework should better reflect a more comprehensive
set of the risk assessment standards used by ICC with respect to
operational risk.
    Further, the Commission believes that by adding references to ICC
as a ``covered'' clearing agency and that, as such, ICC is subject to
Rules 17Ad-22(e)(17) and (21), the proposed rule change strengthens the
Operational Risk Framework by highlighting its specific regulatory
obligations.
    By enhancing ICC's risk management tools as noted above, the
Commission finds the proposed rule change would enhance ICC's ability
to identify and respond to operational risks presented by its clearing
activities, adhere to specific regulatory requirements and, in turn,
enhance its ability to avoid disruption to clearing operations and
address operational risks in a timely fashion. By better positioning
ICC to continue its critical operations and services and mitigating the
risk of financial loss contagion that could be caused by ICC's failure,
the Commission believes that these changes are designed to help
facilitate prompt and accurate clearance and settlement and assure the
safeguarding of securities and funds which are in the custody or
control of ICC. Therefore, the Commission finds the proposed rule
change is consistent with section 17A(b)(3)(F) of the Act.\20\
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    \20\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With and Rule 17Ad-22(e)(17)(i)

    Rule 17Ad-22(e)(17)(i) requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable, manage its operational risks by, among
other things, 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.\21\
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    \21\ 17 CFR 240.17Ad-22(e)(17)(i).
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    As noted above, the proposed rule change would revise the
Operational Risk Framework to note that ERM maintains a register of
material risks faced by ICC. The Commission believes

that this reference facilitates ICC's ability to more effectively
identify plausible sources of operational risk, monitor them on an
ongoing basis, and thus take appropriate and timely action to mitigate
the impact of these risks. The proposal would further note that ERM
provides risk assessment guidelines. The Commission believes this
change also enhances ICC's ability to manage risks by providing clear
and specific guidance in how to assess and mitigate a particular risk's
impact once identified.
    The Commission also believes that the regulatory update in Appendix
1 will strengthen ICC's ability to manage and mitigate operational risk
by specifically noting the legal standards with respect to operational
risk applicable to it as a covered clearing agency. In particular, the
covered clearing agency standards added to the Operational Risk
Framework address the obligation of ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable, manage operational risk through a system
for identification and mitigation of risk, ensuring that systems have a
high degree of operational reliability, and establishment of a business
continuity plan, as well as procedures for regularly reviewing the
efficiency and effectiveness of its clearing and settlement
arrangements, operating structure, products, and use of technology.
    For the reasons stated above, the Commission believes that the
proposed rule change is consistent with the obligation under Rule 17Ad-
22(e)(17)(i).\22\
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    \22\ 17 CFR 240.17Ad-22(e)(17)(i).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of Section 17A
of the Act,\23\ and Rule 17Ad-(e)(17)(i) \24\ thereunder.
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    \23\ 15 U.S.C. 78q-1.
    \24\ 17 CFR 240.17Ad-22(e)(17)(i).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act
\25\ that the proposed rule change (SR-ICC-2021-003), be, and hereby
is, approved.\26\
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    \25\ 15 U.S.C. 78s(b)(2).
    \26\ 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.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05133 Filed 3-11-21; 8:45 am]
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