Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to Amendments to the ICC Operational Risk Management Framework, 18108-18110 [2018-08617]
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Federal Register / Vol. 83, No. 80 / Wednesday, April 25, 2018 / Notices
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 (https://www.sec.gov/
rules/sro.shtml). 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 Section, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filings will also be available for
inspection and copying at the principal
office of ICE Clear Europe and on ICE
Clear Europe’s website at https://
www.theice.com/notices/Notices.shtml?
regulatoryFilings.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–ICEEU–2018–006
and should be submitted on or before
May 16, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08618 Filed 4–24–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83071; File No. SR–ICC–
2018–003]
sradovich on DSK3GMQ082PROD with NOTICES
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to
Amendments to the ICC Operational
Risk Management Framework
April 19, 2018.
I. Introduction
On February 23, 2018, ICE Clear
Credit LLC (‘‘ICC’’) filed with the
Securities and Exchange Commission
6 17
CFR 200.30–3(a)(12).
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19:12 Apr 24, 2018
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(‘‘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 to
update the ICC Operational Risk
Management Framework
(‘‘Framework’’). The proposed rule
change was published for comment in
the Federal Register on March 7, 2018.3
The Commission did not receive
comments regarding the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
II. Description of the Proposed Rule
Change
The Framework details ICC’s program
of operational risk assessment and
oversight.4 The proposed rule change
would modify the Framework to remove
the role of the Operational Risk Manager
(‘‘ORM’’) and assign several of its
responsibilities to the ICE, Inc.
Enterprise Risk Management Chief Risk
Officer for North American Clearing
Houses (‘‘ERM’’).5 The ORM was an ICC
employee responsible for implementing
the Framework across ICC, and reported
directly to ICC’s Chief Compliance
Officer. The ERM, in contrast, is an ICE,
Inc. employee and is responsible for the
ICE, Inc. Enterprise Risk Management
Department’s (‘‘ERM Department’’)
coverage of ICC,6 which provides the
oversight and framework for identifying,
assessing, managing, monitoring, and
reporting on risk across the ICE, Inc.
organization as a whole.7 Going
forward, responsibility for overseeing
the management of the Framework will
rest with the ERM, in conjunction with
the ICC Compliance Committee.8
The proposed rule change would
remove from the risk assessment process
all references to the ORM and assign to
the ERM the ORM’s responsibilities
under the identify, monitor, mitigate,
and report components of the
Operational Risk Lifecycle.9 Similarly,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 82798
(March 1, 2018), 83 FR 9786 (March 7, 2018) (SR–
ICC–2018–003) (‘‘Notice’’).
4 Notice, 83 FR at 9787. Capitalized terms used
herein but not otherwise defined have the meaning
set forth in the ICE Clear Europe rulebook, which
is available at https://www.theice.com/clear-europe/
regulation#rulebook.
5 Id.
6 Id.
7 Id.
8 Id.
9 Id. ICC’s operational risk program is framed by
an Operational Risk Lifecycle, the goal of which is
to actively identify, assess, monitor, mitigate, and
report on all plausible sources of operational risk.
See Securities Exchange Act Release No. 77769
(May 5, 2016), 81 FR 29312 (May 11, 2016) (SR–
ICC–2016–003) (describing the Framework).
2 17
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
the proposed rule change would remove
from the performance objective setting
and monitoring process all references to
the ORM and assign to ICC Systems
Operations and the ERM the ORM’s
responsibilities under the mitigate and
report components of the Operational
Risk Lifecycle.10 The proposed rule
change would eliminate the ORM’s
responsibilities related to business
continuity planning (‘‘BCP’’) and
disaster recovery (‘‘DR’’) from the
‘‘Business Continuity Planning and
Disaster Recovery’’ risk focus area and
reassign those responsibilities to ICC,
the ICC BCP and DR Oversight
Committee, and the ICC Compliance
Committee.11 Finally, the proposed rule
change would remove from the ‘‘New
Products, Processes and Initiatives’’ risk
focus area reference to the ORM’s role
on the ICC New Initiative Approval
Committee and note that the ERM
conducts post-implementation reviews
of new initiatives.12
The proposed rule change would
revise the ‘‘Vendor Assessment’’ risk
focus area of the Framework to clarify
that the ICC BCP and DR Oversight
Committee will replace the ORM in
performing the following functions: (1)
Reviewing and recommending that the
ICC Compliance Committee approve the
inventory of critical vendors and (2)
conducting a service provider risk
assessment for each critical vendor.13
The proposed rule change would also
add to the Framework procedures for
the assessment process of critical
vendors.14
The proposed rule change would
modify the ‘‘ICE Information Security’’
risk focus area of the Framework to refer
to the ICE Information Security
Department’s overall governing
document and to reflect changes to the
membership of the Department’s
governance committee.15
Finally, the proposed rule change
would make clarifying edits to the
Framework to reflect current practices
and other non-material changes.16 For
example, the proposed rule change
would make minor grammatical and
structural changes to the Framework
and update the appendix to more clearly
summarize and describe the regulatory
requirements and industry guidance to
which ICC is subject.17
10 Notice,
83 FR at 9787.
11 Id.
12 Id.
13 Id.
14 Id.
15 Notice,
83 FR at 9787.
16 Id.
17 Id.
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at 9787–9788.
25APN1
Federal Register / Vol. 83, No. 80 / Wednesday, April 25, 2018 / Notices
III. Discussion and 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 such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.18 For
the reasons given below, the
Commission finds that the proposal is
consistent with Section 17A(b)(3)(F) of
the Act 19 and Rules 17Ad–22(d)(4) and
17Ad–22(d)(8) thereunder.20
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 a registered clearing agency be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions, assure the
safeguarding of securities and funds
which are in the custody or control of
the clearing agency or for which it is
responsible and, in general, to protect
investors and the public interest.21
Sound policies, practices, and
procedures with respect to assessment
and oversight of operational risk are an
important component of a registered
clearing agency’s ability to comply with
these requirements because disruptions
to clearing agency operations can impair
the prompt and accurate clearance and
settlement of securities transactions,
safeguarding of securities and funds,
and protection of investors and the
public interest.22
The Commission believes the
proposed rule change will enhance
ICC’s ability to control its operational
risk, and consequently promote the
prompt and accurate clearance and
settlement of securities transactions, by
ensuring that the Framework accurately
reflects the current assignment of
responsibilities among ICC and ICE, Inc.
personnel. It also will add to the
Framework procedures for the
assessment of critical vendors, which
will both increase ICC’s ability to
identify critical vendors and enable ICC
to manage the risks posed by its critical
18 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
20 17 CFR 240.17Ad–22(d)(4) and (8).
21 15 U.S.C. 78q–1(b)(3)(F).
22 See Clearing Agency Standards, Securities
Exchange Act Release No. 68080 (Oct. 22, 2012), 77
FR 66220, 66249 (Nov. 2, 2012) (noting that efforts
to ‘‘address risks posed by potential operational
deficiencies to a clearing agency and its
participants’’ support ‘‘the requirement in Section
17A of the Exchange Act that a clearing agency
must be so organized and have the capacity to be
able to facilitate prompt and accurate clearance and
settlement’’).
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vendors. Finally, by eliminating the
ORM from, and incorporating the ERM
Department into, the oversight process
for the management of the Framework,
the personnel overseeing the
management of the Framework will no
longer be limited to the ICC
organization, but instead will have a
broad view of how the Framework
interacts with and is affected by the ICE,
Inc. organization as a whole. This will,
among other things, allow ICC to rely on
the ERM Department in responding to
broad risks that affect ICC as part of the
larger ICE, Inc. organization while
simultaneously focusing on operational
risks unique to ICC.
Taken together, the Commission
believes these proposed changes will
improve ICC’s ability to assess and
manage operational risks, including by
identifying sources of operational risk
and minimizing them through the
development of appropriate systems,
controls, and procedures, thereby
enhancing ICC’s ability to promote the
prompt and accurate clearance and
settlement of securities transactions,
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, protect
investors and the public interest.
Therefore, the Commission finds that
the proposed rule change is designed to
promote the prompt and accurate
clearance and settlement of securities
transactions, 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, protect
investors and the public interest,
consistent with Section 17A(b)(3)(F) of
the Act.23
B. Consistency With Rule 17Ad–22(d)(4)
Rule 17Ad–22(d)(4) requires that a
registered clearing agency that is not a
covered clearing agency establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to identify sources
of operational risk and minimize them
through the development of appropriate
systems, controls, and procedures.24 As
discussed in detail above in Section
III.A, the proposed rule change will
make a number of enhancements to the
Framework that, taken together, will
improve ICC’s ability to assess and
manage operational risks, including by
identifying sources of operational risk
and minimizing them through the
development of appropriate systems,
controls, and procedures. Accordingly,
the Commission finds that the proposed
23 15
24 17
PO 00000
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(d)(4).
Frm 00117
Fmt 4703
Sfmt 4703
18109
rule change is reasonably designed to
identify sources of operational risk and
minimize them through the
development of appropriate systems,
controls, and procedures, consistent
with Rule 17Ad–22(d)(4).25
C. Consistency With Rule 17Ad–22(d)(8)
Rule 17Ad–22(d)(8) requires that a
registered clearing agency that is not a
covered clearing agency establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to have governance
arrangements that are clear and
transparent to fulfill the public interest
requirements in Section 17A of the
Act 26 applicable to clearing agencies, to
support the objectives of owners and
participants, and to promote the
effectiveness of the clearing agency’s
risk management procedures.27 By
updating the Framework so that it
identifies and refers to appropriate
personnel and accurately reflects the
assignment of responsibilities among
ICC and ICE, Inc. personnel, the
proposed rule change will ensure that
ICC’s governance of the Framework is
clear, transparent, and documented
accurately. Therefore, the Commission
finds that the proposed rule change
establishes governance arrangements
that are clear and transparent to fulfill
the public interest requirements of
Section 17A of the Act 28 applicable to
clearing agencies and the objectives of
participants and to promote the
effectiveness of the clearing agency’s
risk management procedures, consistent
with Rule 17Ad–22(d)(8).29
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 30 and Rules 17Ad–22(d)(4) and (8)
thereunder.31
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 32 that the
proposed rule change (SR–ICC–2018–
003) be, and hereby is, approved.33
25 17
CFR 240.17Ad–22(d)(4).
U.S.C. 78q–1.
27 17 CFR 240.17Ad–22(d)(8).
28 15 U.S.C. 78q–1.
29 17 CFR 240.17Ad–22(d)(8).
30 15 U.S.C. 78q–1.
31 17 CFR 240.17Ad–22(d)(4) and (8).
32 15 U.S.C. 78s(b)(2).
33 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).
26 15
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18110
Federal Register / Vol. 83, No. 80 / Wednesday, April 25, 2018 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–08617 Filed 4–24–18; 8:45 am]
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83064; File No. SR–BX–
2018–014]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Clarify the Requirements
for Delivery of a Contrary Exercise
Advice
April 19, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 9,
2018, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) 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 by the Exchange. 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 the
rules of the Exchange, at Chapter VIII,
Exercises and Deliveries.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
sradovich on DSK3GMQ082PROD with NOTICES
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
Exchange 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. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1. Purpose
The Exchange proposes to correct
Chapter VIII, Exercises and Deliveries,
Section 1, Exercise of Options Contracts,
to clarify the requirements for delivery
of a Contrary Exercise Advice. Section
1(b) currently provides that option
holders desiring to exercise or not
exercise expiring options must either (i)
take no action and allow exercise
determinations to be made in
accordance with the Options Clearing
Corporation’s Ex-by- Ex procedure
where applicable, or (ii) submit a
‘‘Contrary Exercise Advice’’ to the
Options Clearing Corporation through
the participant’s clearing firm. In actual
practice, however, an option holder
delivers a Contrary Exchange Advice to
the Exchange, not to the Options
Clearing Corporation. The Exchange
therefore proposes to replace the words
‘‘Options Clearing Corporation through
the participants clearing firm’’ in
Section 1(b)(ii) with a reference to the
Exchange and make similar, conforming
changes to Section 1(e)(i). As amended,
Section 1(b) would be consistent with
Nasdaq ISE Rule 1100(b) which directs
option holders to submit Contrary
Exercise Advices to the Exchange (not to
the Options Clearing Corporation).
The Exchange proposes to further
replace the words ‘‘by the deadline
specified in paragraph (d) below’’ with
the words ‘‘as specified in paragraph (d)
below’’ given that paragraph (d)
contains a number of requirements
associated with submission of Contrary
Exercise Advices in addition to the
deadline. As revised, Section (b)(ii)
tracks the language of ISE Rule
1100(b)(ii) which permits an options
holder desiring to exercise or not
exercise expiring options to ‘‘submit a
‘‘Contrary Exercise Advice’’ to the
Exchange as specified in paragraph (d)
. . . .’’ (which, like the counterpart BX
paragraph (d) rule, specifies various
requirements associated with submitting
Contrary Exercise Advices).
Finally, the Exchange proposes to
make a number of minor nonsubstantive
revisions to Chapter VIII which are
designed simply to facilitate
administration of the rules. References
to ‘‘BX’’ and to ‘‘BX Regulation’’ are
proposed to be replaced with references
to ‘‘the Exchange.’’ 3 Substituting the
34 17
1 15
VerDate Sep<11>2014
19:12 Apr 24, 2018
3 The changes are proposed to be made in Section
1(b), (d), (e), (f), (g), (h), (i), (k) and (l), as well as
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Fmt 4703
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word ‘‘Exchange’’ for BX in various
places will provide the Exchange
flexibility to determine the most
appropriate department or individual
within the Exchange to oversee the
particular rule, and will also facilitate
the incorporation by reference of the
amended rule into the rules of BX’s
affiliated exchanges in the future.4
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,5 in general, and furthers the
objectives of Section 6(b)(5) of the Act,6
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
identifying the correct entity to which
option holders must deliver Contrary
Exercise Advices and by substituting the
word ‘‘Exchange’’ for BX in various
places which will enable the amended
rule to be incorporated by reference into
rules of affiliated exchanges in the
future, which should enhance the
ability of members of BX and affiliated
exchanges to understand and comply
with a uniform set of rules across the
exchanges.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule changes will apply
equally to all option holders desiring to
exercise options under the BX rules.
Further, the proposed changes merely
correct an incorrect reference to OCC
and conform the wording of the rule
more closely to that of a Nasdaq ISE rule
for the sake of administrative
convenience. The Exchange does not
in Section 2(a) and (b), of Chapter VIII. The
Exchange notes that Chapter 11, Exercises and
Deliveries, of the ISE Rulebook likewise uses the
generic term ‘‘the Exchange’’ throughout that
chapter.
4 Recently, the Exchange added a shell structure
to its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges, Nasdaq
Stock Market LLC; Nasdaq PHLX LLC; Nasdaq ISE,
LLC; Nasdaq GEMX, LLC; and Nasdaq MRX, LLC
(‘‘Affiliated Exchanges’’). See Securities Exchange
Act Release No. 82174 (November 29, 2017), 82 FR
57492 (December 5, 2017) (SR–BX–2017–054). The
changes proposed herein are being made in
connection with that effort, to align the BX rules
with those of the Affiliated Exchanges more closely.
5 15 U.S.C. 78f(b).
6 15 U.S.C. 78f(b)(5).
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]]>Agencies
[Federal Register Volume 83, Number 80 (Wednesday, April 25, 2018)]
[Notices]
[Pages 18108-18110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08617]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83071; File No. SR-ICC-2018-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to Amendments to the ICC
Operational Risk Management Framework
April 19, 2018.
I. Introduction
On February 23, 2018, 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 to update the ICC
Operational Risk Management Framework (``Framework''). The proposed
rule change was published for comment in the Federal Register on March
7, 2018.\3\ The Commission did not receive comments regarding the
proposed rule change. For the reasons discussed below, the Commission
is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 82798 (March 1, 2018),
83 FR 9786 (March 7, 2018) (SR-ICC-2018-003) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Framework details ICC's program of operational risk assessment
and oversight.\4\ The proposed rule change would modify the Framework
to remove the role of the Operational Risk Manager (``ORM'') and assign
several of its responsibilities to the ICE, Inc. Enterprise Risk
Management Chief Risk Officer for North American Clearing Houses
(``ERM'').\5\ The ORM was an ICC employee responsible for implementing
the Framework across ICC, and reported directly to ICC's Chief
Compliance Officer. The ERM, in contrast, is an ICE, Inc. employee and
is responsible for the ICE, Inc. Enterprise Risk Management
Department's (``ERM Department'') coverage of ICC,\6\ which provides
the oversight and framework for identifying, assessing, managing,
monitoring, and reporting on risk across the ICE, Inc. organization as
a whole.\7\ Going forward, responsibility for overseeing the management
of the Framework will rest with the ERM, in conjunction with the ICC
Compliance Committee.\8\
---------------------------------------------------------------------------
\4\ Notice, 83 FR at 9787. Capitalized terms used herein but not
otherwise defined have the meaning set forth in the ICE Clear Europe
rulebook, which is available at https://www.theice.com/clear-europe/regulation#rulebook.
\5\ Id.
\6\ Id.
\7\ Id.
\8\ Id.
---------------------------------------------------------------------------
The proposed rule change would remove from the risk assessment
process all references to the ORM and assign to the ERM the ORM's
responsibilities under the identify, monitor, mitigate, and report
components of the Operational Risk Lifecycle.\9\ Similarly, the
proposed rule change would remove from the performance objective
setting and monitoring process all references to the ORM and assign to
ICC Systems Operations and the ERM the ORM's responsibilities under the
mitigate and report components of the Operational Risk Lifecycle.\10\
The proposed rule change would eliminate the ORM's responsibilities
related to business continuity planning (``BCP'') and disaster recovery
(``DR'') from the ``Business Continuity Planning and Disaster
Recovery'' risk focus area and reassign those responsibilities to ICC,
the ICC BCP and DR Oversight Committee, and the ICC Compliance
Committee.\11\ Finally, the proposed rule change would remove from the
``New Products, Processes and Initiatives'' risk focus area reference
to the ORM's role on the ICC New Initiative Approval Committee and note
that the ERM conducts post-implementation reviews of new
initiatives.\12\
---------------------------------------------------------------------------
\9\ Id. ICC's operational risk program is framed by an
Operational Risk Lifecycle, the goal of which is to actively
identify, assess, monitor, mitigate, and report on all plausible
sources of operational risk. See Securities Exchange Act Release No.
77769 (May 5, 2016), 81 FR 29312 (May 11, 2016) (SR-ICC-2016-003)
(describing the Framework).
\10\ Notice, 83 FR at 9787.
\11\ Id.
\12\ Id.
---------------------------------------------------------------------------
The proposed rule change would revise the ``Vendor Assessment''
risk focus area of the Framework to clarify that the ICC BCP and DR
Oversight Committee will replace the ORM in performing the following
functions: (1) Reviewing and recommending that the ICC Compliance
Committee approve the inventory of critical vendors and (2) conducting
a service provider risk assessment for each critical vendor.\13\ The
proposed rule change would also add to the Framework procedures for the
assessment process of critical vendors.\14\
---------------------------------------------------------------------------
\13\ Id.
\14\ Id.
---------------------------------------------------------------------------
The proposed rule change would modify the ``ICE Information
Security'' risk focus area of the Framework to refer to the ICE
Information Security Department's overall governing document and to
reflect changes to the membership of the Department's governance
committee.\15\
---------------------------------------------------------------------------
\15\ Notice, 83 FR at 9787.
---------------------------------------------------------------------------
Finally, the proposed rule change would make clarifying edits to
the Framework to reflect current practices and other non-material
changes.\16\ For example, the proposed rule change would make minor
grammatical and structural changes to the Framework and update the
appendix to more clearly summarize and describe the regulatory
requirements and industry guidance to which ICC is subject.\17\
---------------------------------------------------------------------------
\16\ Id.
\17\ Id. at 9787-9788.
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[[Page 18109]]
III. Discussion and 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
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\18\ For the reasons given below, the Commission finds
that the proposal is consistent with Section 17A(b)(3)(F) of the Act
\19\ and Rules 17Ad-22(d)(4) and 17Ad-22(d)(8) thereunder.\20\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2)(C).
\19\ 15 U.S.C. 78q-1(b)(3)(F).
\20\ 17 CFR 240.17Ad-22(d)(4) and (8).
---------------------------------------------------------------------------
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 a registered clearing agency be designed to promote the
prompt and accurate clearance and settlement of securities
transactions, assure the safeguarding of securities and funds which are
in the custody or control of the clearing agency or for which it is
responsible and, in general, to protect investors and the public
interest.\21\ Sound policies, practices, and procedures with respect to
assessment and oversight of operational risk are an important component
of a registered clearing agency's ability to comply with these
requirements because disruptions to clearing agency operations can
impair the prompt and accurate clearance and settlement of securities
transactions, safeguarding of securities and funds, and protection of
investors and the public interest.\22\
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\21\ 15 U.S.C. 78q-1(b)(3)(F).
\22\ See Clearing Agency Standards, Securities Exchange Act
Release No. 68080 (Oct. 22, 2012), 77 FR 66220, 66249 (Nov. 2, 2012)
(noting that efforts to ``address risks posed by potential
operational deficiencies to a clearing agency and its participants''
support ``the requirement in Section 17A of the Exchange Act that a
clearing agency must be so organized and have the capacity to be
able to facilitate prompt and accurate clearance and settlement'').
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The Commission believes the proposed rule change will enhance ICC's
ability to control its operational risk, and consequently promote the
prompt and accurate clearance and settlement of securities
transactions, by ensuring that the Framework accurately reflects the
current assignment of responsibilities among ICC and ICE, Inc.
personnel. It also will add to the Framework procedures for the
assessment of critical vendors, which will both increase ICC's ability
to identify critical vendors and enable ICC to manage the risks posed
by its critical vendors. Finally, by eliminating the ORM from, and
incorporating the ERM Department into, the oversight process for the
management of the Framework, the personnel overseeing the management of
the Framework will no longer be limited to the ICC organization, but
instead will have a broad view of how the Framework interacts with and
is affected by the ICE, Inc. organization as a whole. This will, among
other things, allow ICC to rely on the ERM Department in responding to
broad risks that affect ICC as part of the larger ICE, Inc.
organization while simultaneously focusing on operational risks unique
to ICC.
Taken together, the Commission believes these proposed changes will
improve ICC's ability to assess and manage operational risks, including
by identifying sources of operational risk and minimizing them through
the development of appropriate systems, controls, and procedures,
thereby enhancing ICC's ability to promote the prompt and accurate
clearance and settlement of securities transactions, 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, protect
investors and the public interest. Therefore, the Commission finds that
the proposed rule change is designed to promote the prompt and accurate
clearance and settlement of securities transactions, 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, protect
investors and the public interest, consistent with Section 17A(b)(3)(F)
of the Act.\23\
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\23\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(d)(4)
Rule 17Ad-22(d)(4) requires that a registered clearing agency that
is not a covered clearing agency establish, implement, maintain and
enforce written policies and procedures reasonably designed to identify
sources of operational risk and minimize them through the development
of appropriate systems, controls, and procedures.\24\ As discussed in
detail above in Section III.A, the proposed rule change will make a
number of enhancements to the Framework that, taken together, will
improve ICC's ability to assess and manage operational risks, including
by identifying sources of operational risk and minimizing them through
the development of appropriate systems, controls, and procedures.
Accordingly, the Commission finds that the proposed rule change is
reasonably designed to identify sources of operational risk and
minimize them through the development of appropriate systems, controls,
and procedures, consistent with Rule 17Ad-22(d)(4).\25\
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\24\ 17 CFR 240.17Ad-22(d)(4).
\25\ 17 CFR 240.17Ad-22(d)(4).
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C. Consistency With Rule 17Ad-22(d)(8)
Rule 17Ad-22(d)(8) requires that a registered clearing agency that
is not a covered clearing agency establish, implement, maintain and
enforce written policies and procedures reasonably designed to have
governance arrangements that are clear and transparent to fulfill the
public interest requirements in Section 17A of the Act \26\ applicable
to clearing agencies, to support the objectives of owners and
participants, and to promote the effectiveness of the clearing agency's
risk management procedures.\27\ By updating the Framework so that it
identifies and refers to appropriate personnel and accurately reflects
the assignment of responsibilities among ICC and ICE, Inc. personnel,
the proposed rule change will ensure that ICC's governance of the
Framework is clear, transparent, and documented accurately. Therefore,
the Commission finds that the proposed rule change establishes
governance arrangements that are clear and transparent to fulfill the
public interest requirements of Section 17A of the Act \28\ applicable
to clearing agencies and the objectives of participants and to promote
the effectiveness of the clearing agency's risk management procedures,
consistent with Rule 17Ad-22(d)(8).\29\
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\26\ 15 U.S.C. 78q-1.
\27\ 17 CFR 240.17Ad-22(d)(8).
\28\ 15 U.S.C. 78q-1.
\29\ 17 CFR 240.17Ad-22(d)(8).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \30\ and
Rules 17Ad-22(d)(4) and (8) thereunder.\31\
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\30\ 15 U.S.C. 78q-1.
\31\ 17 CFR 240.17Ad-22(d)(4) and (8).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\32\ that the proposed rule change (SR-ICC-2018-003) be, and hereby is,
approved.\33\
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\32\ 15 U.S.C. 78s(b)(2).
\33\ 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).
[[Page 18110]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08617 Filed 4-24-18; 8:45 am]
BILLING CODE 8011-01-P
