Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Risk Parameter Setting and Review Policy, 5748-5752 [2019-03038]

Download as PDF 5748 Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–03042 Filed 2–21–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–54, OMB Control No. 3235–0056] Submission for OMB Review; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Form 8–A Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this request for extension of the previously approved collection of information discussed below. Form 8–A (17 CFR 249.208a) is a registration statement used to register a class of securities under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b) and 78l(g)) (‘‘Exchange Act’’). Section 12(a) (15 U.S.C. 78l(a)) of the Exchange Act makes it unlawful for any member, broker, or dealer to effect any transaction in any security (other than an exempted security) on a national securities exchange unless such security has been registered under the Exchange Act (15 U.S.C. 78a et seq.). Exchange Act Section 12(b) establishes the registration procedures. Exchange Act Section 12(g) requires an issuer that is not a bank or bank holding company to register a class of equity securities (other than exempted securities) within 120 days after its fiscal year end if, on the last day of its fiscal year, the issuer has total assets of more than $10 million and the class of equity securities is ‘‘held of record’’ by either (i) 2,000 persons, or (ii) 500 persons who are not accredited investors. An issuer that is a bank or a bank holding company, must register a class of equity securities (other than exempted securities) within 120 days after the last day of its first fiscal year ended after the effective date of the JOBS Act if, on the last day of its fiscal year, the issuer has total assets of more than $10 million and the class of equity securities is ‘‘held of record’’ by 2,000 or more persons. The information must be filed with the Commission on occasion. Form 8–A is a public document. Form 8–A takes approximately 3 hours to prepare and is filed by approximately 871 respondents for a total annual reporting burden of 2,613 hours (3 hours per response × 871 responses). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The public may view the background documentation for this information collection at the following website, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Lindsay.M.Abate@omb.eop.gov; and (ii) Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: February 19, 2019. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–03083 Filed 2–21–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85157; File No. SR–ICC– 2019–002] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC’s Risk Parameter Setting and Review Policy February 15, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,1 and Rule 19b–4,2 notice is hereby given that on February 6, 2019, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II and III below, which Items have been prepared by ICC. The Commission is 1 15 35 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 16:52 Feb 21, 2019 2 17 Jkt 247001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00089 Fmt 4703 Sfmt 4703 publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The principal purpose of the proposed rule change is to revise the ICC Risk Parameter Setting and Review Policy (‘‘Risk Parameter Policy’’). These revisions do not require any changes to the ICC Clearing Rules (‘‘Rules’’). II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. ICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose ICC proposes to formalize the Risk Parameter Policy that describes the process of setting and reviewing the risk management model (‘‘model’’) core parameters and the performance of sensitivity analyses related to certain parameter settings. ICC proposes to formalize the Risk Parameter Policy following Commission approval of the proposed rule change. Parameter Setting and Calibration ICC’s Risk Parameter Policy discusses the process of setting and reviewing the model core parameters and their underlying assumptions. The model requirements include bid/offer (‘‘BO’’) requirements, large position requirements, Jump-To-Default (‘‘JTD’’) requirements, interest rate (‘‘IR’’) sensitivity requirements, basis risk requirements, and integrated spread response (‘‘iSR’’) requirements. The parameters that are associated with the model requirements are listed in a table containing various parameter-related information, including the methods used to review parameter settings; the frequency of the reviews; and the groups involved in the review process (‘‘reviewers’’), such as the ICC Risk Management Department (‘‘ICC Risk’’), the Risk Working Group (‘‘RWG’’), or the Risk Committee. The parameters are described in more detail as follows. E:\FR\FM\22FEN1.SGM 22FEN1 Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices The Risk Parameter Policy explains the process of setting and reviewing the liquidity charge parameters. The liquidity charge parameters are associated with BO requirements, also referred to as liquidity charges, which incorporate the transaction costs associated with liquidating the portfolio of a defaulting Clearing Participant (‘‘CP’’). With respect to index instruments, the Risk Parameter Policy specifies how ICC Risk estimates the BO Widths (‘‘BOWs’’) for indices across volatile and extreme market conditions, in addition to how ICC Risk recognizes long-short benefits when computing portfolio-level index liquidity charges. In reference to single-name (‘‘SN’’) instruments, the Risk Parameter Policy introduces certain parameters to incorporate a price-based BOW component and a spread-based BOW component into the liquidity charge. The Risk Parameter Policy requires ICC to estimate and review the liquidity charge parameters at least monthly and summarizes the associated governance process, including the reviewers and any prerequisites to the implementation of parameter updates (e.g., review by the RWG or ‘‘no objection’’ ruling by the Risk Committee). The Risk Parameter Policy discusses the estimation and the review of the concentration charge parameters, which are related to large position requirements. Large position requirements, also referred to as concentration charges, apply to positions that exceed a predefined notional amount threshold and increase as the amount above the threshold increases. The Risk Parameter Policy details how ICC Risk establishes seriesspecific or SN-specific concentration charge threshold levels for each index or SN Risk Factor (‘‘RF’’),3 and how ICC Risk estimates concentration charge growth rates that determine how quickly concentration charges increase with position size. The Risk Parameter Policy directs ICC to estimate and review the concentration charge parameters at least monthly and provides information on the corresponding governance process, stating the reviewers and any prerequisites to implementing parameter updates. The parameters impacting the JTD requirement are categorized as either Loss-Given-Default (‘‘LGD’’) or WrongWay Risk (‘‘WWR’’) parameters. ICC’s risk management methodology incorporates considerations of idiosyncratic credit events and the associated potential losses. These credit event losses are termed LGD, and the Risk Parameter Policy discusses the determination and review of the associated LGD parameters. Specifically, the Risk Parameter Policy explains how, in order to measure credit event losses, ICC Risk constructs JTD scenarios in terms of anticipated recovery rate (‘‘RR’’) levels (‘‘RR scenarios’’). The Risk Parameter Policy references RR scenarios and estimations for corporate SNs, sectors, and sovereign reference entities, and notes foreign exchange rate risk considerations with respect to sovereign reference entities. Additionally, the LGD computations at the RF Group (‘‘RFG’’) 4 level depend on certain RFG-related parameters, which are specified in the Risk Parameter Policy. The Risk Parameter Policy requires ICC to estimate and review the LGD parameters at least monthly and describes the associated governance process, noting the reviewers and any prerequisites to the implementation of parameter updates. The Risk Parameter Policy details the process of setting and reviewing the WWR parameters. WWR arises when there is a strong adverse correlation between a CP’s default risk and the occurrence of large losses in a CP’s portfolio. ICC considers three types of WWR: Specific WWR (‘‘SWWR’’) results from self-referencing trades; General WWR (‘‘GWWR’’) results from trades that involve RFs within the sovereign and banking sectors that are highly correlated with the CP, or with an entity that is guaranteed by, or affiliated with the CP; and Contagion WWR results from portfolio level aggregation of WWR exposure beyond a portfolio level WWR threshold. The Risk Parameter Policy contains information regarding the parameters that are used to quantify WWR dependence, compute WWR JTD requirements, and determine the level of WWR collateralization. The Risk Parameter Policy details the thresholds that are established as parameters for each RF generating WWR exposure, beyond which the increased level of WWR collateralization applies. Additionally, ICC estimates, reviews, and performs sensitivity analyses on the WWR parameters at least monthly, and the Risk Parameter Policy discusses the associated governance process, including the reviewers and any prerequisites to implementing parameter updates. The Risk Parameter Policy contains information on the estimation and the review of the parameters that serve as inputs to the IR sensitivity requirement. 3 ICC deems each index, sub-index, or underlying SN reference entity a separate RF. 4 ICC deems a set of SN RFs related by a common parental ownership structure a RFG. VerDate Sep<11>2014 16:52 Feb 21, 2019 Jkt 247001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 5749 The IR sensitivity requirement accounts for the risk associated with changes in the default-free discount term structure used to price CDS instruments. With respect to the IR sensitivity requirement parameters, the Risk Parameter Policy specifies how ICC Risk estimates the up and down parallel shifts for the US Dollar and Euro default-free discount term structures. The Risk Parameter Policy directs ICC to estimate and review the IR sensitivity requirement parameters at least monthly and specifies the corresponding governance process, noting the reviewers and any prerequisites to the implementation of parameter updates. The Risk Parameter Policy discusses the setting and calibration of the parameters that are associated with the basis risk requirement. As index-derived SN positions and opposite ‘‘outright’’ SN positions are offset, the basis risk requirement is introduced to capture the differences between the trading characteristics of index instruments and their replicating baskets of SN constituents. In reference to the basis risk requirement parameters, the Risk Parameter Policy discusses how ICC Risk estimates the basis between index spreads for each index family and the basis attributable to the fact that the index and the SNs may have different coupons. ICC estimates and reviews the basis risk requirement parameters at least monthly, and the Risk Parameter Policy details the corresponding governance process, specifying the reviewers and any prerequisites to implementing parameter updates. The parameters impacting the iSR requirement, which captures credit spread and RR fluctuations, are classified as either univariate or multivariate level. The standardized distributions that describe the behavior of credit spread log-returns are characterized by certain univariate level iSR parameters that are specified in the Risk Parameter Policy. Moreover, the Risk Parameter Policy discusses the estimation of the univariate level iSR parameters, including by considering time series analysis of credit spread logreturns. The Risk Parameter Policy explains how different mean absolute deviation (‘‘MAD’’) estimates are obtained for each time series. In addition, the Risk Parameter Policy references the setting of the exponentially weighted moving average (‘‘EWMA’’) decay rate (‘‘EWMA factor’’), along with the estimation of certain RFspecific parameters describing the SN RR distributions. The Risk Parameter Policy requires ICC to estimate, review, and perform sensitivity analyses on the univariate level iSR parameters at least E:\FR\FM\22FEN1.SGM 22FEN1 5750 Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices monthly and specifies the associated governance process, including the reviewers and any prerequisites to the implementation of parameter updates. The Risk Parameter Policy contains information regarding the process of determining and reviewing the multivariate level iSR parameters. Using a simulation framework, ICC generates spread and RR scenarios by means of copulas to connect the univariate distributions that describe spread and RR fluctuations. The Risk Parameter Policy describes the multivariate parameters that serve as inputs to the copula simulations. Namely, the Risk Parameter Policy specifies the setting of a certain parameter to reflect tail dependence, a concept indicating the probability of extreme values occurring jointly. The Risk Parameter Policy also references the estimation of the Kendall tau rank-order correlations for the copula simulations. ICC estimates and reviews the multivariate level iSR parameters at least monthly, and the Risk Parameter Policy notes the corresponding governance process, including the reviewers. Sensitivity Analysis The Risk Parameter Policy details the sensitivity analyses that ICC Risk performs to explore the sensitivity of the risk management system’s outputs to certain model core parameters that are calibrated on an ad-hoc basis and to alternative data analyses and parameter estimation techniques. ICC conducts a sensitivity analysis on the univariate level iSR parameters by utilizing alternative techniques to estimate the parameters that fit the standardized distributions to the observed credit spread log-return data. The Risk Parameter Policy also considers the impact of the alternatively estimated parameters. This sensitivity analysis is reviewed with the RWG monthly and provides information if a change to the current estimation technique is considered. Further, the Risk Parameter Policy distinguishes two levels of sensitivity analyses, those that include a clearinghouse-wide portfolio impact study and those, such as this one, that do not include a portfolio impact study. ICC performs a sensitivity analysis, which does not include a portfolio impact study, by introducing different values for the EWMA factor. The Risk Parameter Policy discusses the impact of using different values for this univariate level iSR parameter and requires ICC to review this sensitivity analysis monthly with the RWG. Under the Risk Parameter Policy, ICC carries out a sensitivity analysis on the VerDate Sep<11>2014 16:52 Feb 21, 2019 Jkt 247001 routinely updated parameters. The Risk Parameter Policy identifies certain parameters that are updated routinely (i.e., daily or monthly) and are subject to a sensitivity analysis with a clearinghouse-wide portfolio impact study. The Risk Parameter Policy requires that the results of the proposed parameter updates are reviewed with the RWG prior to implementation and notes that this sensitivity analysis provides information regarding potential risk requirement changes due to routine parameter updates. The portfolio benefits parameters are subject to a sensitivity analysis that includes a clearinghouse-wide portfolio impact study. Namely, ICC Risk estimates certain risk measures at predefined quantile levels by incorporating different dependence structures in order to guide ICC Risk in situations where back-testing results indicate excessive portfolio benefits. Under the Risk Parameter Policy, this sensitivity analysis is reviewed with the Risk Committee monthly. Since the model allows the level of SWWR collateralization to be controlled by a model threshold, ICC conducts a sensitivity analysis for the SWWR threshold. ICC explores the maximum SWWR charges by requiring full collateralization of index-derived SWWR. This sensitivity analysis includes a clearinghouse-wide portfolio impact study and guides ICC Risk when there is a decision to fully collateralize SWWR. Under the Risk Parameter Policy, this sensitivity analysis is reviewed with the Risk Committee monthly. ICC performs a sensitivity analysis on MAD levels by shifting all MAD estimates to their stress levels to provide information about the response of risk requirements to potential volatility shifts and to assess the viability of certain parameter-setting assumptions. This sensitivity analysis includes a clearinghouse-wide portfolio impact study and is reviewed monthly with the Risk Committee. ICC Risk performs a sensitivity analysis for the Guaranty Fund (‘‘GF’’) JTD configuration. ICC’s GF model aims to establish financial resources that are sufficient to cover hypothetical losses associated with simultaneous credit events where up to five SN RFGs are impacted. In that, two of the selected SN RFGs are CP SN RFGs (i.e., Cover-2 GF sizing) and the other three SN RFGs are non-CP RFGs. ICC considers an alternative where three of the selected SN RFGs are CP SN RFGs (i.e., Cover3 GF sizing) and the other two are nonCP SN RFGs. This sensitivity analysis includes a clearinghouse-wide portfolio PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 impact study, provides information when a change to the GF JTD configuration is considered, and is reviewed with the Risk Committee monthly. (b) Statutory Basis Section 17A(b)(3)(F) of the Act 5 requires, among other things, that the rules of a clearing agency 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 the clearing agency or for which it is responsible; in general, to protect investors and the public interest; and to comply with the provisions of the Act and the rules and regulations thereunder. ICC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICC, in particular, to Section 17(A)(b)(3)(F),6 because ICC believes that the proposed rule change to formalize the Risk Parameter Policy promotes the soundness of ICC’s model. The Risk Parameter Policy describes ICC’s process of setting and reviewing the model core parameters, in addition to the details surrounding ICC’s performance of sensitivity analyses. The Risk Parameter Policy provides assurances as to the appropriateness of model core parameter settings and, accordingly, the appropriateness of margin requirements, thereby facilitating ICC’s ability to promptly and accurately clear and settle its cleared CDS contracts; enhancing ICC’s ability to assure the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible; and protecting investors and the public interest. Moreover, ICC believes that having policies and procedures that clearly and accurately document ICC’s process of setting and reviewing the model core parameters, along with ICC’s performance of sensitivity analyses, is an important component to the effectiveness of ICC’s risk management system, which promotes the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions; the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible; and the protection of investors and the public interest. As such, the proposed 5 15 U.S.C. 78q–1(b)(3)(F). 6 Id. E:\FR\FM\22FEN1.SGM 22FEN1 Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices rule change is designed to promote the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions; to contribute to the safeguarding of securities and funds associated with security-based swap transactions in ICC’s custody or control, or for which ICC is responsible; and, in general, to protect investors and the public interest within the meaning of Section 17A(b)(3)(F) of the Act.7 In addition, the proposed rule change is consistent with the relevant requirements of Rule 17Ad–22.8 Rule 17Ad–22(b)(2) 9 requires ICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk-based models and parameters to set margin requirements and review such margin requirements and the related risk-based models and parameters at least monthly. Under the Risk Parameter Policy, ICC estimates and reviews the model core parameter settings at least monthly and performs and reviews sensitivity analyses related to certain parameter settings monthly. Such procedures serve to promote the soundness of ICC’s model and to ensure that ICC’s risk management system is effective and appropriate in addressing the risks associated with clearing security based swap-related portfolios. Namely, by requiring that ICC regularly review the model core parameter settings and sensitivity analyses related to certain parameter settings, the Risk Parameter Policy promotes ICC’s use of margin requirements to limit its credit exposures to participants under normal market conditions and ICC’s use of riskbased models and parameters to set margin requirements and review such margin requirements and the related risk-based models and parameters at least monthly, consistent with Rule 17Ad–22(b)(2).10 Rule 17Ad–22(b)(3) 11 requires ICC to 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 CP families to which it has the largest exposures in extreme but plausible market conditions. The Risk Parameter Policy assures the appropriateness of model core parameter settings through a regular review process involving various reviewers, which supports ICC’s ability to maintain sufficient margin requirements and enhances ICC’s approach to identifying potential weaknesses, thereby ensuring that ICC continues to maintain sufficient financial resources to withstand, at a minimum, a default by the two CP families to which it has the largest exposures in extreme but plausible market conditions, consistent with the requirements of Rule 17Ad–22(b)(3).12 Rule 17Ad–22(d)(8) 13 requires ICC to 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.14 The Risk Parameter Policy clearly assigns and documents responsibility and accountability for the estimation and review of the model core parameters and the performance of sensitivity analyses. Moreover, the Risk Parameter Policy describes the methods used to review parameter settings and perform sensitivity analyses, the frequency of the reviews, the groups involved in the review process, and any prerequisites to implementing parameter updates. These governance arrangements are clear and transparent, such that information relating to the assignment of responsibilities and the requisite involvement of ICC Risk, the RWG, and the Risk Committee is clearly documented, consistent with the requirements of Rule 17Ad–22(d)(8).15 (B) Clearing Agency’s Statement on Burden on Competition ICC does not believe the proposed rule change would have any impact, or impose any burden, on competition. The proposed change to formalize the Risk Parameter Policy will apply uniformly across all market participants. Therefore, ICC does not believe the proposed rule change imposes any burden on competition that is inappropriate in furtherance of the purposes of the Act. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the 7 Id. 8 17 12 Id. 9 17 CFR 240.17Ad–22. CFR 240.17Ad–22(b)(2). 10 Id. 11 17 CFR 240.17Ad–22(b)(3). 13 17 VerDate Sep<11>2014 16:52 Feb 21, 2019 CFR 240.17Ad–22(d)(8). U.S.C. 78q–1. 15 17 CFR 240.17Ad–22(d)(8). 14 15 Jkt 247001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 5751 Commission of any written comments received by ICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ICC–2019–002 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR–ICC–2019–002. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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 Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of E:\FR\FM\22FEN1.SGM 22FEN1 5752 Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices 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 Credit and on ICE Clear Credit’s website at https:// www.theice.com/clear-credit/regulation. 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–ICC–2019–002 and should be submitted on or before March 15, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–03038 Filed 2–21–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85153; File No. SR– NASDAQ–2019–007] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Reassign Certain Investigation and Enforcement Functions Under the Exchange’s Authority and Supervision February 15, 2019. 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 February 5, 2019, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II 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 assume operational responsibility for certain investigation and enforcement functions currently performed by the Financial Industry Regulatory Authority (‘‘FINRA’’) under the Exchange’s authority and supervision. Nasdaq Rule 0150 requires Commission approval for this transfer of operational responsibility to Nasdaq. Nasdaq anticipates a phased transition, whereby Nasdaq would assume increasing responsibility throughout 2019 and into early 2020 for investigation and enforcement activities for certain conduct occurring on the Nasdaq and Nasdaq BX, Inc. (‘‘BX’’) markets (collectively, the ‘‘Exchanges’’). The text of the proposed rule change is available on the Exchange’s website at https://nasdaq.cchwallstreet.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 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 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 1. Purpose Section 6 of the Act requires that national securities exchanges enforce their members’ compliance with federal securities laws and rules as well as the exchanges’ own rules.3 As a selfregulatory organization (‘‘SRO’’), Nasdaq must have a comprehensive regulatory program that includes investigation and prosecution of suspicious activity. Since it became a national securities exchange, Nasdaq has contracted with FINRA through various regulatory services agreements (‘‘RSAs’’) to perform certain of these regulatory functions on its behalf. However, as the Commission has made clear, ‘‘the Nasdaq Exchange bears the responsibility for self-regulatory conduct and primary liability for selfregulatory failures, not the SRO retained to perform regulatory functions on the Exchange’s behalf.’’ 4 Notwithstanding its use of FINRA, the Exchange has also retained operational responsibility for a number of regulatory 3 15 U.S.C. 78(f). Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550, 3556 (January 23, 2006). 16 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 16:52 Feb 21, 2019 4 Securities Jkt 247001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 functions, including real-time surveillance, qualification of companies listed on Nasdaq and most surveillance related to its affiliated options markets. Historically, Nasdaq retained operational responsibility in areas where Nasdaq’s expertise regarding its own markets, technology and listed companies enhanced regulation. In recognition of this, on September 30, 2013, the Commission approved Nasdaq’s proposal to reallocate operational responsibility from FINRA to Nasdaq for certain equities surveillance patterns and related review functions, focused on: (1) Manipulation patterns that monitor solely Nasdaq activity; and (2) monitoring of compliance by member firms with elements of the Commission’s Regulation M and Nasdaq Rule 4619 compliance.5 Building on Nasdaq’s experience and expertise, this proposal reflects a natural evolution of Nasdaq’s proven model to assume and retain operational responsibility in areas where its indepth knowledge of its markets and members enhances market regulation. For the reasons outlined below, Nasdaq now seeks Commission approval to reallocate operational responsibility from FINRA to Nasdaq Regulation 6 for certain investigation and enforcement activity, namely: • Investigation and enforcement responsibilities for conduct occurring on its options markets (The BX Options Market and The Nasdaq Options Market), and • investigation and enforcement responsibilities for conduct occurring on the Nasdaq and BX equity markets only, i.e., not also on non-Nasdaq equities markets.7 Currently, under RSAs, FINRA is responsible for, among other things, the investigation of matters referred from Nasdaq MarketWatch and the Phlx Market Surveillance department. FINRA is also responsible for providing services related to Nasdaq’s formal disciplinary process, including the issuance of Wells Notices, Cautionary Action Letters, Complaints, and settlement documents. Nasdaq now proposes to perform these functions and is seeking Commission approval to do so. Nasdaq 5 Securities Exchange Act Release No. 70569 (September 30, 2013), 78 FR 62814 (October 22, 2013) (SR–NASDAQ–2013–102). 6 Under Nasdaq Rule 9120(t), Nasdaq Regulation includes the Nasdaq Enforcement Department. 7 Nasdaq Regulation currently performs these functions for the Nasdaq PHLX LLC (‘‘Phlx’’), Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq GEMX, LLC (‘‘GEMX’’), and Nasdaq MRX, LLC (‘‘MRX’’) because there is no comparable rule to Rule 0150 on those markets. E:\FR\FM\22FEN1.SGM 22FEN1

Agencies

[Federal Register Volume 84, Number 36 (Friday, February 22, 2019)]
[Notices]
[Pages 5748-5752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03038]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85157; File No. SR-ICC-2019-002]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to ICC's Risk Parameter Setting 
and Review Policy

February 15, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on February 6, 
2019, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I, 
II and III below, which Items have been prepared by ICC. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the 
ICC Risk Parameter Setting and Review Policy (``Risk Parameter 
Policy''). These revisions do not require any changes to the ICC 
Clearing Rules (``Rules'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. ICC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    ICC proposes to formalize the Risk Parameter Policy that describes 
the process of setting and reviewing the risk management model 
(``model'') core parameters and the performance of sensitivity analyses 
related to certain parameter settings. ICC proposes to formalize the 
Risk Parameter Policy following Commission approval of the proposed 
rule change.
Parameter Setting and Calibration
    ICC's Risk Parameter Policy discusses the process of setting and 
reviewing the model core parameters and their underlying assumptions. 
The model requirements include bid/offer (``BO'') requirements, large 
position requirements, Jump-To-Default (``JTD'') requirements, interest 
rate (``IR'') sensitivity requirements, basis risk requirements, and 
integrated spread response (``iSR'') requirements. The parameters that 
are associated with the model requirements are listed in a table 
containing various parameter-related information, including the methods 
used to review parameter settings; the frequency of the reviews; and 
the groups involved in the review process (``reviewers''), such as the 
ICC Risk Management Department (``ICC Risk''), the Risk Working Group 
(``RWG''), or the Risk Committee. The parameters are described in more 
detail as follows.

[[Page 5749]]

    The Risk Parameter Policy explains the process of setting and 
reviewing the liquidity charge parameters. The liquidity charge 
parameters are associated with BO requirements, also referred to as 
liquidity charges, which incorporate the transaction costs associated 
with liquidating the portfolio of a defaulting Clearing Participant 
(``CP''). With respect to index instruments, the Risk Parameter Policy 
specifies how ICC Risk estimates the BO Widths (``BOWs'') for indices 
across volatile and extreme market conditions, in addition to how ICC 
Risk recognizes long-short benefits when computing portfolio-level 
index liquidity charges. In reference to single-name (``SN'') 
instruments, the Risk Parameter Policy introduces certain parameters to 
incorporate a price-based BOW component and a spread-based BOW 
component into the liquidity charge. The Risk Parameter Policy requires 
ICC to estimate and review the liquidity charge parameters at least 
monthly and summarizes the associated governance process, including the 
reviewers and any prerequisites to the implementation of parameter 
updates (e.g., review by the RWG or ``no objection'' ruling by the Risk 
Committee).
    The Risk Parameter Policy discusses the estimation and the review 
of the concentration charge parameters, which are related to large 
position requirements. Large position requirements, also referred to as 
concentration charges, apply to positions that exceed a predefined 
notional amount threshold and increase as the amount above the 
threshold increases. The Risk Parameter Policy details how ICC Risk 
establishes series-specific or SN-specific concentration charge 
threshold levels for each index or SN Risk Factor (``RF''),\3\ and how 
ICC Risk estimates concentration charge growth rates that determine how 
quickly concentration charges increase with position size. The Risk 
Parameter Policy directs ICC to estimate and review the concentration 
charge parameters at least monthly and provides information on the 
corresponding governance process, stating the reviewers and any 
prerequisites to implementing parameter updates.
---------------------------------------------------------------------------

    \3\ ICC deems each index, sub-index, or underlying SN reference 
entity a separate RF.
---------------------------------------------------------------------------

    The parameters impacting the JTD requirement are categorized as 
either Loss-Given-Default (``LGD'') or Wrong-Way Risk (``WWR'') 
parameters. ICC's risk management methodology incorporates 
considerations of idiosyncratic credit events and the associated 
potential losses. These credit event losses are termed LGD, and the 
Risk Parameter Policy discusses the determination and review of the 
associated LGD parameters. Specifically, the Risk Parameter Policy 
explains how, in order to measure credit event losses, ICC Risk 
constructs JTD scenarios in terms of anticipated recovery rate (``RR'') 
levels (``RR scenarios''). The Risk Parameter Policy references RR 
scenarios and estimations for corporate SNs, sectors, and sovereign 
reference entities, and notes foreign exchange rate risk considerations 
with respect to sovereign reference entities. Additionally, the LGD 
computations at the RF Group (``RFG'') \4\ level depend on certain RFG-
related parameters, which are specified in the Risk Parameter Policy. 
The Risk Parameter Policy requires ICC to estimate and review the LGD 
parameters at least monthly and describes the associated governance 
process, noting the reviewers and any prerequisites to the 
implementation of parameter updates.
---------------------------------------------------------------------------

    \4\ ICC deems a set of SN RFs related by a common parental 
ownership structure a RFG.
---------------------------------------------------------------------------

    The Risk Parameter Policy details the process of setting and 
reviewing the WWR parameters. WWR arises when there is a strong adverse 
correlation between a CP's default risk and the occurrence of large 
losses in a CP's portfolio. ICC considers three types of WWR: Specific 
WWR (``SWWR'') results from self-referencing trades; General WWR 
(``GWWR'') results from trades that involve RFs within the sovereign 
and banking sectors that are highly correlated with the CP, or with an 
entity that is guaranteed by, or affiliated with the CP; and Contagion 
WWR results from portfolio level aggregation of WWR exposure beyond a 
portfolio level WWR threshold. The Risk Parameter Policy contains 
information regarding the parameters that are used to quantify WWR 
dependence, compute WWR JTD requirements, and determine the level of 
WWR collateralization. The Risk Parameter Policy details the thresholds 
that are established as parameters for each RF generating WWR exposure, 
beyond which the increased level of WWR collateralization applies. 
Additionally, ICC estimates, reviews, and performs sensitivity analyses 
on the WWR parameters at least monthly, and the Risk Parameter Policy 
discusses the associated governance process, including the reviewers 
and any prerequisites to implementing parameter updates.
    The Risk Parameter Policy contains information on the estimation 
and the review of the parameters that serve as inputs to the IR 
sensitivity requirement. The IR sensitivity requirement accounts for 
the risk associated with changes in the default-free discount term 
structure used to price CDS instruments. With respect to the IR 
sensitivity requirement parameters, the Risk Parameter Policy specifies 
how ICC Risk estimates the up and down parallel shifts for the US 
Dollar and Euro default-free discount term structures. The Risk 
Parameter Policy directs ICC to estimate and review the IR sensitivity 
requirement parameters at least monthly and specifies the corresponding 
governance process, noting the reviewers and any prerequisites to the 
implementation of parameter updates.
    The Risk Parameter Policy discusses the setting and calibration of 
the parameters that are associated with the basis risk requirement. As 
index-derived SN positions and opposite ``outright'' SN positions are 
offset, the basis risk requirement is introduced to capture the 
differences between the trading characteristics of index instruments 
and their replicating baskets of SN constituents. In reference to the 
basis risk requirement parameters, the Risk Parameter Policy discusses 
how ICC Risk estimates the basis between index spreads for each index 
family and the basis attributable to the fact that the index and the 
SNs may have different coupons. ICC estimates and reviews the basis 
risk requirement parameters at least monthly, and the Risk Parameter 
Policy details the corresponding governance process, specifying the 
reviewers and any prerequisites to implementing parameter updates.
    The parameters impacting the iSR requirement, which captures credit 
spread and RR fluctuations, are classified as either univariate or 
multivariate level. The standardized distributions that describe the 
behavior of credit spread log-returns are characterized by certain 
univariate level iSR parameters that are specified in the Risk 
Parameter Policy. Moreover, the Risk Parameter Policy discusses the 
estimation of the univariate level iSR parameters, including by 
considering time series analysis of credit spread log-returns. The Risk 
Parameter Policy explains how different mean absolute deviation 
(``MAD'') estimates are obtained for each time series. In addition, the 
Risk Parameter Policy references the setting of the exponentially 
weighted moving average (``EWMA'') decay rate (``EWMA factor''), along 
with the estimation of certain RF-specific parameters describing the SN 
RR distributions. The Risk Parameter Policy requires ICC to estimate, 
review, and perform sensitivity analyses on the univariate level iSR 
parameters at least

[[Page 5750]]

monthly and specifies the associated governance process, including the 
reviewers and any prerequisites to the implementation of parameter 
updates.
    The Risk Parameter Policy contains information regarding the 
process of determining and reviewing the multivariate level iSR 
parameters. Using a simulation framework, ICC generates spread and RR 
scenarios by means of copulas to connect the univariate distributions 
that describe spread and RR fluctuations. The Risk Parameter Policy 
describes the multivariate parameters that serve as inputs to the 
copula simulations. Namely, the Risk Parameter Policy specifies the 
setting of a certain parameter to reflect tail dependence, a concept 
indicating the probability of extreme values occurring jointly. The 
Risk Parameter Policy also references the estimation of the Kendall tau 
rank-order correlations for the copula simulations. ICC estimates and 
reviews the multivariate level iSR parameters at least monthly, and the 
Risk Parameter Policy notes the corresponding governance process, 
including the reviewers.
Sensitivity Analysis
    The Risk Parameter Policy details the sensitivity analyses that ICC 
Risk performs to explore the sensitivity of the risk management 
system's outputs to certain model core parameters that are calibrated 
on an ad-hoc basis and to alternative data analyses and parameter 
estimation techniques.
    ICC conducts a sensitivity analysis on the univariate level iSR 
parameters by utilizing alternative techniques to estimate the 
parameters that fit the standardized distributions to the observed 
credit spread log-return data. The Risk Parameter Policy also considers 
the impact of the alternatively estimated parameters. This sensitivity 
analysis is reviewed with the RWG monthly and provides information if a 
change to the current estimation technique is considered. Further, the 
Risk Parameter Policy distinguishes two levels of sensitivity analyses, 
those that include a clearinghouse-wide portfolio impact study and 
those, such as this one, that do not include a portfolio impact study.
    ICC performs a sensitivity analysis, which does not include a 
portfolio impact study, by introducing different values for the EWMA 
factor. The Risk Parameter Policy discusses the impact of using 
different values for this univariate level iSR parameter and requires 
ICC to review this sensitivity analysis monthly with the RWG.
    Under the Risk Parameter Policy, ICC carries out a sensitivity 
analysis on the routinely updated parameters. The Risk Parameter Policy 
identifies certain parameters that are updated routinely (i.e., daily 
or monthly) and are subject to a sensitivity analysis with a 
clearinghouse-wide portfolio impact study. The Risk Parameter Policy 
requires that the results of the proposed parameter updates are 
reviewed with the RWG prior to implementation and notes that this 
sensitivity analysis provides information regarding potential risk 
requirement changes due to routine parameter updates.
    The portfolio benefits parameters are subject to a sensitivity 
analysis that includes a clearinghouse-wide portfolio impact study. 
Namely, ICC Risk estimates certain risk measures at pre-defined 
quantile levels by incorporating different dependence structures in 
order to guide ICC Risk in situations where back-testing results 
indicate excessive portfolio benefits. Under the Risk Parameter Policy, 
this sensitivity analysis is reviewed with the Risk Committee monthly.
    Since the model allows the level of SWWR collateralization to be 
controlled by a model threshold, ICC conducts a sensitivity analysis 
for the SWWR threshold. ICC explores the maximum SWWR charges by 
requiring full collateralization of index-derived SWWR. This 
sensitivity analysis includes a clearinghouse-wide portfolio impact 
study and guides ICC Risk when there is a decision to fully 
collateralize SWWR. Under the Risk Parameter Policy, this sensitivity 
analysis is reviewed with the Risk Committee monthly.
    ICC performs a sensitivity analysis on MAD levels by shifting all 
MAD estimates to their stress levels to provide information about the 
response of risk requirements to potential volatility shifts and to 
assess the viability of certain parameter-setting assumptions. This 
sensitivity analysis includes a clearinghouse-wide portfolio impact 
study and is reviewed monthly with the Risk Committee.
    ICC Risk performs a sensitivity analysis for the Guaranty Fund 
(``GF'') JTD configuration. ICC's GF model aims to establish financial 
resources that are sufficient to cover hypothetical losses associated 
with simultaneous credit events where up to five SN RFGs are impacted. 
In that, two of the selected SN RFGs are CP SN RFGs (i.e., Cover-2 GF 
sizing) and the other three SN RFGs are non-CP RFGs. ICC considers an 
alternative where three of the selected SN RFGs are CP SN RFGs (i.e., 
Cover-3 GF sizing) and the other two are non-CP SN RFGs. This 
sensitivity analysis includes a clearinghouse-wide portfolio impact 
study, provides information when a change to the GF JTD configuration 
is considered, and is reviewed with the Risk Committee monthly.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \5\ requires, among other things, 
that the rules of a clearing agency 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 the clearing agency or for which it is 
responsible; in general, to protect investors and the public interest; 
and to comply with the provisions of the Act and the rules and 
regulations thereunder. ICC believes that the proposed rule change is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to Section 
17(A)(b)(3)(F),\6\ because ICC believes that the proposed rule change 
to formalize the Risk Parameter Policy promotes the soundness of ICC's 
model. The Risk Parameter Policy describes ICC's process of setting and 
reviewing the model core parameters, in addition to the details 
surrounding ICC's performance of sensitivity analyses. The Risk 
Parameter Policy provides assurances as to the appropriateness of model 
core parameter settings and, accordingly, the appropriateness of margin 
requirements, thereby facilitating ICC's ability to promptly and 
accurately clear and settle its cleared CDS contracts; enhancing ICC's 
ability to assure the safeguarding of securities and funds which are in 
the custody or control of ICC or for which it is responsible; and 
protecting investors and the public interest. Moreover, ICC believes 
that having policies and procedures that clearly and accurately 
document ICC's process of setting and reviewing the model core 
parameters, along with ICC's performance of sensitivity analyses, is an 
important component to the effectiveness of ICC's risk management 
system, which promotes the prompt and accurate clearance and settlement 
of securities transactions, derivatives agreements, contracts, and 
transactions; the safeguarding of securities and funds which are in the 
custody or control of ICC or for which it is responsible; and the 
protection of investors and the public interest. As such, the proposed

[[Page 5751]]

rule change is designed to promote the prompt and accurate clearance 
and settlement of securities transactions, derivatives agreements, 
contracts, and transactions; to contribute to the safeguarding of 
securities and funds associated with security-based swap transactions 
in ICC's custody or control, or for which ICC is responsible; and, in 
general, to protect investors and the public interest within the 
meaning of Section 17A(b)(3)(F) of the Act.\7\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
    \7\ Id.
---------------------------------------------------------------------------

    In addition, the proposed rule change is consistent with the 
relevant requirements of Rule 17Ad-22.\8\ Rule 17Ad-22(b)(2) \9\ 
requires ICC to establish, implement, maintain and enforce written 
policies and procedures reasonably designed to use margin requirements 
to limit its credit exposures to participants under normal market 
conditions and use risk-based models and parameters to set margin 
requirements and review such margin requirements and the related risk-
based models and parameters at least monthly. Under the Risk Parameter 
Policy, ICC estimates and reviews the model core parameter settings at 
least monthly and performs and reviews sensitivity analyses related to 
certain parameter settings monthly. Such procedures serve to promote 
the soundness of ICC's model and to ensure that ICC's risk management 
system is effective and appropriate in addressing the risks associated 
with clearing security based swap-related portfolios. Namely, by 
requiring that ICC regularly review the model core parameter settings 
and sensitivity analyses related to certain parameter settings, the 
Risk Parameter Policy promotes ICC's use of margin requirements to 
limit its credit exposures to participants under normal market 
conditions and ICC's use of risk-based models and parameters to set 
margin requirements and review such margin requirements and the related 
risk-based models and parameters at least monthly, consistent with Rule 
17Ad-22(b)(2).\10\
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17Ad-22.
    \9\ 17 CFR 240.17Ad-22(b)(2).
    \10\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(b)(3) \11\ requires ICC to 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 CP families to which it has the largest 
exposures in extreme but plausible market conditions. The Risk 
Parameter Policy assures the appropriateness of model core parameter 
settings through a regular review process involving various reviewers, 
which supports ICC's ability to maintain sufficient margin requirements 
and enhances ICC's approach to identifying potential weaknesses, 
thereby ensuring that ICC continues to maintain sufficient financial 
resources to withstand, at a minimum, a default by the two CP families 
to which it has the largest exposures in extreme but plausible market 
conditions, consistent with the requirements of Rule 17Ad-22(b)(3).\12\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.17Ad-22(b)(3).
    \12\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(8) \13\ requires ICC to 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.\14\ The Risk Parameter Policy clearly assigns and documents 
responsibility and accountability for the estimation and review of the 
model core parameters and the performance of sensitivity analyses. 
Moreover, the Risk Parameter Policy describes the methods used to 
review parameter settings and perform sensitivity analyses, the 
frequency of the reviews, the groups involved in the review process, 
and any prerequisites to implementing parameter updates. These 
governance arrangements are clear and transparent, such that 
information relating to the assignment of responsibilities and the 
requisite involvement of ICC Risk, the RWG, and the Risk Committee is 
clearly documented, consistent with the requirements of Rule 17Ad-
22(d)(8).\15\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.17Ad-22(d)(8).
    \14\ 15 U.S.C. 78q-1.
    \15\ 17 CFR 240.17Ad-22(d)(8).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed rule change would have any 
impact, or impose any burden, on competition. The proposed change to 
formalize the Risk Parameter Policy will apply uniformly across all 
market participants. Therefore, ICC does not believe the proposed rule 
change imposes any burden on competition that is inappropriate in 
furtherance of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ICC-2019-002 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-ICC-2019-002. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of

[[Page 5752]]

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 Credit 
and on ICE Clear Credit's website at https://www.theice.com/clear-credit/regulation.
    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-ICC-2019-002 and should be 
submitted on or before March 15, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03038 Filed 2-21-19; 8:45 am]
 BILLING CODE 8011-01-P
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