Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to ICC's Liquidity Risk Management Framework and ICC's Stress Testing Framework, 46844-46845 [2017-21540]

Download as PDF 46844 Federal Register / Vol. 82, No. 193 / Friday, October 6, 2017 / Notices This meeting will be webcast live at the Web address—http://www.nrc.gov/. SECURITIES AND EXCHANGE COMMISSION Week of October 30, 2017—Tentative [Release No. 34–81797; File No. SR–ICC– 2017–012] There are no meetings scheduled for the week of October 30, 2017. There are no meetings scheduled for the week of November 6, 2017. Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to ICC’s Liquidity Risk Management Framework and ICC’s Stress Testing Framework Week of November 13, 2017—Tentative October 2, 2017. Week of November 6, 2017—Tentative asabaliauskas on DSKBBXCHB2PROD with NOTICES There are no meetings scheduled for the week of November 13, 2017. * * * * * The schedule for Commission meetings is subject to change on short notice. For more information or to verify the status of meetings, contact Denise McGovern at 301–415–0681 or via email at Denise.McGovern@nrc.gov. * * * * * The NRC Commission Meeting Schedule can be found on the Internet at: http://www.nrc.gov/public-involve/ public-meetings/schedule.html. * * * * * The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (e.g., braille, large print), please notify Kimberly Meyer, NRC Disability Program Manager, at 301–287–0739, by videophone at 240–428–3217, or by email at Kimberly.Meyer-Chambers@ nrc.gov. Determinations on requests for reasonable accommodation will be made on a case-by-case basis. * * * * * Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Nuclear Regulatory Commission, Office of the Secretary, Washington, DC 20555 (301– 415–1969), or email Brenda.Akstulewicz@nrc.gov or Patricia.Jimenez@nrc.gov. Dated: October 4, 2017. Denise L. McGovern, Policy Coordinator, Office of the Secretary. [FR Doc. 2017–21755 Filed 10–4–17; 4:15 pm] 18:40 Oct 05, 2017 II. Description of the Proposed Rule Change In connection with clearing Single Name (‘‘SN’’) credit default swaps (‘‘CDS’’) referencing ICC Clearing Participants (‘‘CPs’’), ICC has proposed changes to its Stress Testing Framework and Liquidity Risk Management Framework, which ICC believes will enhance its stress testing and liquidity stress testing practices. The proposed rule change would expand the stress test scenarios that ICC considers to be extreme but plausible by incorporating additional losses related to the expected loss given default of all names not explicitly assumed to enter a state of default in a CP’s portfolio.4 The proposed change would similarly amend the stress scenarios described in ICC’s Liquidity Risk Management Framework, which ICC stated is necessary to ensure consistency across its documents.5 The proposed change would also incorporate an enhanced analysis of profits and losses (‘‘P/L’’) arising out of General Wrong-Way Risk (‘‘GWWR’’) generated by SNs in the III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act 11 directs the Commission to approve a proposed rule change of a selfregulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) 12 of the Act requires, inter alia, that the rules of a clearing agency be designed to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency, or for which it is Jkt 244001 1 15 6 Notice, 2 17 BILLING CODE 7590–01–P VerDate Sep<11>2014 I. Introduction On August 22, 2017, 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 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change (SR–ICC–2017–012) to amend the ICC Liquidity Risk Management Framework and the ICC Stress Testing Framework. The proposed rule change was published for comment in the Federal Register on August 31, 2017.3 The Commission received no comment letters regarding the proposed change. For the reasons discussed below, the Commission is approving the proposed rule change. Banking and Sovereign sectors.6 Further, the proposed change would clarify ICC’s current view that certain GWWR and contagion stress scenarios are extreme, but not plausible, and that such scenarios would be reviewed for informational purposes only.7 The proposed change would enhance ICC’s guaranty fund sizing process by adding a new sensitivity analysis. This new analysis would contemplate the default of three CP SNs and two non-CP SNs. This analysis would be in addition to the current sizing approach, which contemplates the default of two CP SNs and three non-CP SNs. While not immediately requiring the collection of additional resources, ICC stated that the proposed change could provide a potential remedy where deficiencies are identified in ICC’s current sizing methodology.8 ICC also proposes to add an interest rate sensitivity analysis in order to comply with CFTC Regulation 17 CFR 39.36. The proposed interest rate sensitivity analysis would shock the Euro and USD interest rate curves up and down to see which scenario would lead to further erosion of ICC’s guaranty fund. ICC stated that this analysis would have no impact on its guaranty fund sizing methodology.9 The proposed change also includes amendments to ICC’s approach to Specific Wrong-Way Risk (‘‘SWWR’’) P/L to expand the SWWR P/L to incorporate losses arising in connection with defaulting CP specific exposures, and also adds a description of ICC’s current client stress testing practices. ICC stated that these changes were proposed for consistency with specific CFTC regulations.10 7 Id. U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 81486 (August 25, 2017), 82 FR 41454 (August 31, 2017) (SR–ICC–2017–012) (‘‘Notice’’). 4 Notice, 82 FR at 41455. 5 Notice, 82 FR at 41455–56. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 82 FR at 41455. 8 Id. 9 Id. 10 Id. 11 15 12 15 E:\FR\FM\06OCN1.SGM U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 06OCN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES Federal Register / Vol. 82, No. 193 / Friday, October 6, 2017 / Notices responsible. Rule 17Ad–22(b)(3) 13 requires, inter alia, that a registered clearing agency acting as a central counterparty for security-based swaps shall establish, implement, maintain, and enforce written policies and procedures reasonably designed to maintain sufficient financial resources to withstand, at a minimum, a default by the two participant families to which it has the largest exposures in extreme but plausible market conditions, in its capacity as a central counterparty for security-based swaps. The Commission finds that the proposed rule change, which enhances ICC’s Stress Testing Framework and Liquidity Risk Management Framework, is consistent with section 17A 14 of the Act and Rule 17Ad–22 15 thereunder. As noted above, in response to the clearing of SN CDS referencing CPs, the proposed change would expand the range of stress tests that ICC considers to be extreme but plausible. The Commission has reviewed the Notice and ICC’s rules, policies, and procedures, and believes that the expanded range of extreme but plausible scenarios, supplemented by the information that will be provided by certain additional GWWR and contagion stress scenarios considered to be extreme but implausible, enhance ICC’s processes for estimating the amount of financial resources ICC should collect. Additionally, while adoption of the sensitivity analyses described above will not immediately require ICC to collect additional financial resources, it will provide ICC with additional risk management information. Further, ICC stated that at least in some cases, one of the newly added analyses could provide a potential remedy where deficiencies are identified in ICC’s current sizing methodology.16 Consequently, the Commission believes that the proposed rule change is reasonably designed to ensure that ICC maintains sufficient financial resources in accordance with the requirements of Rule 17Ad–22(b)(3) and will thereby enhance ICC’s ability to safeguard the securities and funds of CPs in the event of participant defaults. As a result, the Commission finds that the proposed change is consistent with the requirements of section 17A of the Act and the relevant provisions of Rule 17Ad–22. IV. Conclusion It is therefore ordered pursuant to section 19(b)(2) of the Act that the 13 17 CFR 240.17Ad–22(b)(3). U.S.C. 78q–1. 15 17 CFR 240.17Ad–22. 16 Notice, 82 FR at 41455. 14 15 VerDate Sep<11>2014 18:40 Oct 05, 2017 Jkt 244001 proposed rule change (SR–ICC–2017– 012) be, and hereby is, approved.17 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–21540 Filed 10–5–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81791; File No. SR–NYSE– 2017–50] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Price List To Permit Affiliated Member Organizations That Are Supplemental Liquidity Providers October 2, 2017. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 25, 2017, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Price List to permit affiliated member organizations that are Supplemental Liquidity Providers (‘‘SLPs’’) on the Exchange to obtain the most favorable rate when (1) at least one affiliate satisfies the quoting requirements for SLPs in assigned securities, and (2) the combined SLPs’ aggregate volumes satisfy the adding liquidity volume requirements for SLP tiered and nontiered rates. The Exchange proposes to implement the proposed changes on September 25, 2017.4 The proposed rule 17 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). 18 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 4 The Exchange originally filed to amend the Price List on August 31, 2017 (SR–NYSE–2017–46), PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 46845 change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Price List to permit affiliated member organizations that are SLPs on the Exchange to obtain the most favorable rate when (1) at least one affiliate satisfies the quoting requirements for SLPs in assigned securities, and (2) the combined SLPs’ aggregate volumes satisfy the adding liquidity volume requirements for SLP tiered and nontiered rates. The proposed changes would be applicable to all SLP transactions, regardless of price of the security. The Exchange proposes to implement these changes to its Price List effective September 25, 2017. Proposed Rule Change SLPs are eligible for certain credits when adding liquidity to the Exchange. The amount of the credit is currently determined by the ‘‘tier’’ for which the SLP qualifies, which is based on the SLP’s level of quoting and ADV of liquidity added by the SLP in assigned securities. Currently, SLP Tier 3 provides that when adding liquidity to the NYSE in securities with a share price of $1.00 or more, an SLP is eligible for a credit of $0.0023 per share traded if the SLP (1) meets the 10% average or more quoting requirement in an assigned security pursuant to Rule 107B and (2) adds liquidity for all assigned SLP securities withdrew such filing on September 13, 2017, and refiled the same day (SR–NYSE–2017–48). SR– NYSE–48 [sic] was subsequently withdrawn and replaced by this filing. E:\FR\FM\06OCN1.SGM 06OCN1

Agencies

[Federal Register Volume 82, Number 193 (Friday, October 6, 2017)]
[Notices]
[Pages 46844-46845]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81797; File No. SR-ICC-2017-012]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to ICC's Liquidity Risk 
Management Framework and ICC's Stress Testing Framework

October 2, 2017.

I. Introduction

    On August 22, 2017, 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 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2017-012) 
to amend the ICC Liquidity Risk Management Framework and the ICC Stress 
Testing Framework. The proposed rule change was published for comment 
in the Federal Register on August 31, 2017.\3\ The Commission received 
no comment letters regarding the proposed 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\ Securities Exchange Act Release No. 81486 (August 25, 2017), 
82 FR 41454 (August 31, 2017) (SR-ICC-2017-012) (``Notice'').
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II. Description of the Proposed Rule Change

    In connection with clearing Single Name (``SN'') credit default 
swaps (``CDS'') referencing ICC Clearing Participants (``CPs''), ICC 
has proposed changes to its Stress Testing Framework and Liquidity Risk 
Management Framework, which ICC believes will enhance its stress 
testing and liquidity stress testing practices. The proposed rule 
change would expand the stress test scenarios that ICC considers to be 
extreme but plausible by incorporating additional losses related to the 
expected loss given default of all names not explicitly assumed to 
enter a state of default in a CP's portfolio.\4\ The proposed change 
would similarly amend the stress scenarios described in ICC's Liquidity 
Risk Management Framework, which ICC stated is necessary to ensure 
consistency across its documents.\5\ The proposed change would also 
incorporate an enhanced analysis of profits and losses (``P/L'') 
arising out of General Wrong-Way Risk (``GWWR'') generated by SNs in 
the Banking and Sovereign sectors.\6\ Further, the proposed change 
would clarify ICC's current view that certain GWWR and contagion stress 
scenarios are extreme, but not plausible, and that such scenarios would 
be reviewed for informational purposes only.\7\
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    \4\ Notice, 82 FR at 41455.
    \5\ Notice, 82 FR at 41455-56.
    \6\ Notice, 82 FR at 41455.
    \7\ Id.
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    The proposed change would enhance ICC's guaranty fund sizing 
process by adding a new sensitivity analysis. This new analysis would 
contemplate the default of three CP SNs and two non-CP SNs. This 
analysis would be in addition to the current sizing approach, which 
contemplates the default of two CP SNs and three non-CP SNs. While not 
immediately requiring the collection of additional resources, ICC 
stated that the proposed change could provide a potential remedy where 
deficiencies are identified in ICC's current sizing methodology.\8\
---------------------------------------------------------------------------

    \8\ Id.
---------------------------------------------------------------------------

    ICC also proposes to add an interest rate sensitivity analysis in 
order to comply with CFTC Regulation 17 CFR 39.36. The proposed 
interest rate sensitivity analysis would shock the Euro and USD 
interest rate curves up and down to see which scenario would lead to 
further erosion of ICC's guaranty fund. ICC stated that this analysis 
would have no impact on its guaranty fund sizing methodology.\9\
---------------------------------------------------------------------------

    \9\ Id.
---------------------------------------------------------------------------

    The proposed change also includes amendments to ICC's approach to 
Specific Wrong-Way Risk (``SWWR'') P/L to expand the SWWR P/L to 
incorporate losses arising in connection with defaulting CP specific 
exposures, and also adds a description of ICC's current client stress 
testing practices. ICC stated that these changes were proposed for 
consistency with specific CFTC regulations.\10\
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    \10\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \11\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization.
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    \11\ 15 U.S.C. 78s(b)(2)(C).
---------------------------------------------------------------------------

    Section 17A(b)(3)(F) \12\ of the Act requires, inter alia, that the 
rules of a clearing agency be designed to assure the safeguarding of 
securities and funds which are in the custody or control of the 
clearing agency, or for which it is

[[Page 46845]]

responsible. Rule 17Ad-22(b)(3) \13\ requires, inter alia, that a 
registered clearing agency acting as a central counterparty for 
security-based swaps shall establish, implement, maintain, and enforce 
written policies and procedures reasonably designed to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the two participant families to which it has the largest exposures in 
extreme but plausible market conditions, in its capacity as a central 
counterparty for security-based swaps.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(b)(3).
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    The Commission finds that the proposed rule change, which enhances 
ICC's Stress Testing Framework and Liquidity Risk Management Framework, 
is consistent with section 17A \14\ of the Act and Rule 17Ad-22 \15\ 
thereunder. As noted above, in response to the clearing of SN CDS 
referencing CPs, the proposed change would expand the range of stress 
tests that ICC considers to be extreme but plausible. The Commission 
has reviewed the Notice and ICC's rules, policies, and procedures, and 
believes that the expanded range of extreme but plausible scenarios, 
supplemented by the information that will be provided by certain 
additional GWWR and contagion stress scenarios considered to be extreme 
but implausible, enhance ICC's processes for estimating the amount of 
financial resources ICC should collect.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78q-1.
    \15\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------

    Additionally, while adoption of the sensitivity analyses described 
above will not immediately require ICC to collect additional financial 
resources, it will provide ICC with additional risk management 
information. Further, ICC stated that at least in some cases, one of 
the newly added analyses could provide a potential remedy where 
deficiencies are identified in ICC's current sizing methodology.\16\ 
Consequently, the Commission believes that the proposed rule change is 
reasonably designed to ensure that ICC maintains sufficient financial 
resources in accordance with the requirements of Rule 17Ad-22(b)(3) and 
will thereby enhance ICC's ability to safeguard the securities and 
funds of CPs in the event of participant defaults. As a result, the 
Commission finds that the proposed change is consistent with the 
requirements of section 17A of the Act and the relevant provisions of 
Rule 17Ad-22.
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    \16\ Notice, 82 FR at 41455.
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IV. Conclusion

    It is therefore ordered pursuant to section 19(b)(2) of the Act 
that the proposed rule change (SR-ICC-2017-012) be, and hereby is, 
approved.\17\
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    \17\ 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).
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21540 Filed 10-5-17; 8:45 am]
BILLING CODE 8011-01-P