Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Stress Testing Framework, 25310-25313 [2019-11340]

Download as PDF 25310 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices FOR FURTHER INFORMATION CONTACT: NUCLEAR REGULATORY COMMISSION Mallecia Sutton, telephone: 301–415– 0673, email: Mallecia.Sutton@nrc.gov or Allen Fetter, telephone: 301–415–8556, email: Allen.Fetter@nrc.gov. Both staff of the U.S. Nuclear Regulatory Commission, Washington, DC 20555– 0001. [Docket No. 52–047; NRC–2016–0119] Tennessee Valley Authority; Clinch River Nuclear Site Nuclear Regulatory Commission. ACTION: Early site permit application; receipt. AGENCY: I. Background The U.S. Nuclear Regulatory Commission (NRC) is giving notice once each week for four consecutive weeks for an application from Tennessee Valley Authority (TVA), for an early site permit (ESP) for the Clinch River Nuclear Site located in Oak Ridge, Tennessee. The ESP application was received on May 12, 2016 and supplemented with Revision 2 on January 18, 2019. ADDRESSES: Please refer to Docket ID NRC–2016–0119 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods: • Federal Rulemaking Website: Go to https://www.regulations.gov and search for Docket ID NRC–2016–0119. Address questions about NRC docket IDs in Regulations.gov to Jennifer Borges; telephone: 301–287–9127; email: Jennifer.Borges@nrc.gov. For technical questions, contact the individuals listed in the FOR FURTHER INFORMATION CONTACT section of this document. • NRC’s Agencywide Documents Access and Management System (ADAMS): You may obtain publiclyavailable documents online in the ADAMS Public Documents collection at https://www.nrc.gov/reading-rm/ adams.html. To begin the search, select ‘‘Begin Web-based ADAMS Search.’’ For problems with ADAMS, please contact the NRC’s Public Document Room (PDR) reference staff at 1–800–397–4209, 301– 415–4737, or by email to pdr.resource@ nrc.gov. The ADAMS accession number for each document referenced (if it is available in ADAMS) is provided the first time that it is mentioned in this document. For the convenience of the reader, instructions about obtaining materials referenced in this document are provided in the ‘‘Availability of Documents’’ section of this document. • NRC’s PDR: You may examine and purchase copies of public documents at the NRC’s PDR, Room O1–F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. khammond on DSKBBV9HB2PROD with NOTICES VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 [FR Doc. 2019–10128 Filed 5–30–19; 8:45 am] BILLING CODE 7590–01–P SUPPLEMENTARY INFORMATION: SUMMARY: DATES: For the Nuclear Regulatory Commission. Jennivine K. Rankin, Acting Chief, Licensing Branch 3, Division of New Reactor Licensing, Office of New Reactors. TVA (the applicant) has filed an application for an ESP for the Clinch River Nuclear Site located in Oak Ridge, Tennessee (ADAMS Accession No. ML16139A752), under Section 103 of the Atomic Energy Act of 1954, as amended, and part 52 of title 10 of the Code of Federal Regulations (10 CFR), ‘‘Licenses, Certifications, and Approvals for Nuclear Power Plants.’’ TVA filed Revision 2 of the application dated January 18, 2019 (ADAMS Accession No. ML19030A485). Through the application, which is currently under review by the NRC staff, the applicant seeks an ESP separate from the filing of an application for a construction permit (CP) or combined license (COL) for a nuclear power facility. The ESP process allows resolution of issues relating to siting. At any time during the period of an ESP (up to 20 years), the permit holder may reference the permit in an application for a CP or COL. The information submitted by the applicant includes certain administrative information, as well as technical information submitted pursuant to 10 CFR 52.24(a) and 10 CFR 51.105(a). These notices are being provided in accordance with the requirements in 10 CFR 50.43(a)(3). II. Availability of Documents The documents identified in the following table are available to interested persons through one or more of the following methods, as indicated. Document ADAMS accession No. ESP application Cover Letter .......... ESP application Administrative Information. ESP application Site Safety Analysis Report. ESP application Environmental Report. ESP application Emergency Plan ... ESP application Exemptions and Departures. ESP application Enclosures ............ ML19030A485 ML18003A298 ML19030A358 ML19030A478 ML18003A485 ML19030A479 ML19030A568 Dated at Rockville, Maryland, this 13th day of May 2019. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85938; File No. SR–ICC– 2019–005] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC’s Stress Testing Framework May 24, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 16, 2019, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission the proposed rule change described in Items I, II, and III below, which Items have been prepared primarily by ICC. The Commission is 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 Stress Testing Framework. 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, security-based swap submission, or advance notice and discussed any comments it received on the proposed rule change, securitybased swap submission, or advance notice. 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. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\31MYN1.SGM 31MYN1 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose ICC proposes revising its Stress Testing Framework. ICC believes such revisions will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. The proposed revisions are described in detail as follows. ICC proposes changes to the Stress Testing Framework to enhance ICC’s stress testing practices. The proposed changes strengthen the documentation surrounding ICC’s stress testing methodology, including by introducing certain core concepts earlier in the Stress Testing Framework, updating terminology to maintain uniformity in the document, and providing additional clarity on the construction and reporting of stress scenarios. The proposed changes also remove a section that is no longer relevant and strengthen governance arrangements related to the identification and remediation of poor stress testing performance. ICC further proposes clarification and clean-up changes throughout the document to enhance readability. ICC proposes to make such changes effective following Commission approval of the proposed rule change. ICC proposes changes to the ‘Methodology’ section of the Stress Testing Framework. Under the proposed changes, ICC will introduce its Cover-2 requirement, including related definitions, earlier in the document, noting that it establishes if financial resources will cover hypothetical losses associated with the two greatest Clearing Participant (‘‘CP’’) Affiliate Group (‘‘AG’’) uncollateralized stress losses associated with extreme but plausible scenarios. ICC proposes terminology updates, such as utilizing ‘‘CP AG’’ to reference CPs under a common parent entity, replacing a phrase with an abbreviation that was previously introduced, and shortening ‘‘Lehman Brothers’’ to ‘‘LB’’. ICC proposes conforming changes throughout the document. ICC also proposes a clarification edit to specify the basis for ICC’s stress testing practices. In the ‘Methodology’ section, ICC proposes to introduce the forward looking (hypothetically constructed) scenarios. Under the proposed revisions, ICC will add language describing the forward looking (hypothetically constructed) scenarios and move two paragraphs on their VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 construction from the ‘Predefined Scenarios’ section to the ‘Methodology’ section. ICC proposes edits for clarity and uniformity to such paragraphs, including referring to ‘‘reference entity groups’’ as ‘‘Risk Factor Groups’’ 3 (‘‘RFGs’’), which ICC also proposes to do throughout the document; defining a CP RFG as a CP AG; specifying the reference entities in a RFG for stress testing; and adding definite article ‘‘the’’ in the phrase ‘‘as well as the peak’’. ICC proposes to add language further explaining the calculation of LossGiven-Default (‘‘LGD’’) and Expected LGD (‘‘ELGD’’) with respect to the forward looking (hypothetically constructed) scenarios. The proposed changes amend the ‘Predefined Scenarios’ section. The proposed revisions indicate which scenarios are not expected to be realized as market outcomes and utilize bulleted lists to more clearly define the scenarios corresponding to the Historically Observed Extreme but Plausible Market Scenarios and the Historically Observed Extreme but Plausible Market Scenarios reflecting a baseline credit event. ICC proposes to cross-reference relevant sections when noting information found in those sections and make corresponding changes throughout the document. In describing the Hypothetically Constructed (Forward Looking) Extreme but Plausible Market Scenarios, ICC proposes to specifically refer to ‘‘references entities’’ as ‘‘Single Name Risk Factors’’; incorporate language on the associated adverse credit event analysis; and utilize a bulleted list to more clearly define the scenarios corresponding to the Hypothetically Constructed (Forward Looking) Extreme but Plausible Market Scenarios. In discussing the Extreme Model Response Test Scenarios, ICC proposes to add the word ‘‘Market’’ to the phrase ‘‘Historically Observed Extreme but Plausible Market scenarios’’ and to utilize a bulleted list to more clearly define the scenarios corresponding to the Extreme Model Response Test Scenarios. The proposed amendments move the ‘General Wrong Way Risk and Contagion Stress Tests’ section ahead of the adequacy and sensitivity analysis sections. The ‘General Wrong Way Risk and Contagion Stress Tests’ section is currently located between the adequacy and sensitivity analysis sections, and ICC proposes that it follow the ‘Display of Discordant Behavior among 3 ICC deems each single name reference entity a Risk Factor. ICC deems a set of single name Risk Factors related by a common parental ownership structure a RFG. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 25311 Instrument Groups’ section to avoid disrupting the grouping of adequacy and sensitivity analyses. ICC proposes to remove the ‘Correlation Sensitivity Analysis based on Monte Carlo Simulations’ section. Given the transition from a stress-based methodology to a Monte Carlo simulations-based methodology for certain components of the Initial Margin model (the ‘‘model’’),4 references to the Monte Carlo sensitivity analysis as a stress testing analysis in the Stress Testing Framework are no longer relevant. ICC considers a sensitivity analysis of risk parameters to be more fitting and incorporated such analysis in the ICC Risk Parameter Setting and Review Policy, which describes the process of setting and reviewing the model core parameters and the performance of sensitivity analyses related to certain parameter settings.5 ICC proposes a clarification update to indicate which scenarios generally yield the greatest consumption of the Guaranty Fund in the ‘Recovery Rate Sensitivity Analysis’ section and the ‘Interest Rate Sensitivity Analysis’ section. ICC proposes amendments to the ‘Interpretation of Results’ section. ICC proposes to incorporate language that more clearly defines the scenarios corresponding to the Historically Observed and Hypothetically Constructed Extreme but Plausible Scenarios. Under the proposed revisions, the ICC reports that are associated with stress scenarios are listed in a table, along with the reporting frequency and classification (e.g., extreme but plausible, extreme and not expected to be realized, etc.), and a paragraph on hypothetical losses follows the table given its connection to the stress scenarios in the table. ICC proposes clarification edits to this paragraph, such as replacing ‘‘total’’ with ‘‘sum’’, adding a parenthetical, and more generally referring to powers of assessment. Further, ICC proposes that a paragraph describing a figure in the document appear before, instead of after, the figure and that such figure is re-numbered given the addition of the proposed table. With respect to stress test results, ICC proposes to specify that it considers hypothetical losses on a Cover-2 basis and to cross-reference a section on the remediation of poor stress testing performance. The proposed 4 See SR–ICC–2018–008 for a description of the transition from a stress-based approach to a Monte Carlo simulations-based methodology for the spread response and recovery rate sensitivity response components of the model. 5 See SR–ICC–2019–002 for a description of the ICC Risk Parameter Setting and Review Policy. E:\FR\FM\31MYN1.SGM 31MYN1 25312 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES changes also note that the Risk Department conducts monthly parameter reviews and parameter sensitivity analyses. ICC proposes amendments to the ‘Post-Stress Testing Review & Governance Structure’ section. ICC proposes to cross-reference the table from the ‘Interpretation of Results’ section when noting information depicted in the table and make corresponding changes throughout the document. ICC proposes to clarify the frequency at which stress testing results are reviewed and risk results and issues are discussed. ICC proposes to note the Risk Committee’s role in ad hoc reviews of stress testing results undertaken by the Chief Risk Officer (‘‘CRO’’) or designee and to more clearly state that ICC conducts certain ‘‘periodic’’ reporting on a weekly basis. Also, the proposed changes provide clarification and direction with respect to poor stress testing performance, including by indicating that ICC considers stress test deficiencies on a Cover-2 basis, specifying the Risk Department’s role in identifying poor stress testing performance, and explaining how the Risk Department determines poor stress testing performance. Moreover, the proposed revisions specifically provide the CRO and Risk Oversight Officer (‘‘ROO’’) with authority to determine poor stress testing performance and describe the actions to take upon identifying poor stress testing performance, including by the Risk Working Group (‘‘RWG’’) and the Risk Department. In addition, ICC proposes to replace certain general references to the Risk Department with more specific references to the CRO, or designee. ICC proposes to update the ‘References’ section with two ICC policies that provide further information on ICC Risk Department practices, including the calculation of LGD and ELGD and the performance of monthly parameter reviews and parameter sensitivity analyses. (b) Statutory Basis Section 17A(b)(3)(F) of the Act 6 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; 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),7 because ICC believes that the proposed rule change will promote the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions, and 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. The proposed changes to the Stress Testing Framework strengthen the documentation surrounding ICC’s stress testing methodology, including by introducing certain core concepts earlier in the document, updating terminology to maintain uniformity, and providing additional clarity on the construction and reporting of stress scenarios. The proposed changes remove information that is no longer relevant and strengthen governance arrangements related to the identification and remediation of poor stress testing performance, which serves to enhance ICC’s approach to identifying potential weaknesses in the risk methodology. The clarification and clean-up changes that enhance readability further ensure that the documentation of ICC’s Stress Testing Framework remains up-to-date, clear, and transparent. ICC believes that having policies and procedures that clearly and accurately document ICC’s stress testing practices are 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 and the safeguarding of securities and funds associated with security-based swap transactions in ICC’s custody or control, or for which ICC is responsible. As such, the proposed rule change is designed to promote the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions and 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 within the meaning of Section 17A(b)(3)(F) of the Act.8 In addition, the proposed revisions to the Stress Testing Framework are consistent with the relevant 7 Id. 6 15 U.S.C. 78q–1(b)(3)(F). VerDate Sep<11>2014 16:42 May 30, 2019 8 Id. Jkt 247001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 requirements of Rule 17Ad–22.9 Rule 17Ad–22(b)(3) 10 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 proposed changes to the Stress Testing Framework provide further clarity and transparency regarding ICC’s stress testing practices, including by strengthening the documentation surrounding ICC’s stress testing methodology through the introduction of certain core concepts earlier in the document, updates to stress testing terminology to maintain uniformity, and additional clarity on the construction and reporting of stress testing scenarios. The proposed revisions also support ICC’s ability to maintain sufficient risk requirements and enhance ICC’s approach to identifying potential weaknesses in the risk management system by incorporating additional procedures related to the identification and remediation of poor stress testing performance, thereby ensuring that ICC maintains 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).11 Rule 17Ad–22(d)(8) 12 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.13 The proposed changes strengthen the governance arrangements set forth in the Stress Testing Framework by clearly assigning and documenting responsibility and accountability for the identification and remediation of poor stress testing performance. As such, these governance arrangements are clear and transparent, such that information relating to the assignment of responsibilities and the requisite involvement of the CRO, ROO, Risk Department, RWG, the Risk Committee, and the Board is clearly documented, consistent with the requirements of Rule 17Ad–22(d)(8).14 9 17 CFR 240.17Ad–22. CFR 240.17Ad–22(b)(3). 11 Id. 12 17 CFR 240.17Ad–22(d)(8). 13 15 U.S.C. 78q–1. 14 17 CFR 240.17Ad–22(d)(8). 10 17 E:\FR\FM\31MYN1.SGM 31MYN1 Federal Register / Vol. 84, No. 105 / Friday, May 31, 2019 / Notices (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 changes to ICC’s Stress Testing Framework 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: khammond on DSKBBV9HB2PROD with NOTICES 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–2019–005 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–2019–005. This file number should be included on the subject line if email is used. To help the Commission process and review your VerDate Sep<11>2014 16:42 May 30, 2019 Jkt 247001 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 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–2019–005 and should be submitted on or before June 21, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–11340 Filed 5–30–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85937; File No. SR–NYSE– 2019–28] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Amending Section 303A.08 of the Listed Company Manual Relating to Shareholder Approval of Equity Compensation Plans May 24, 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 May 13, 2019, New York Stock Exchange LLC 15 17 PO 00000 CFR 200.30–3(a)(12). Frm 00083 Fmt 4703 Sfmt 4703 25313 (‘‘NYSE’’ or the ‘‘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 Section 303A.08 of the Listed Company Manual (the ‘‘Manual’’) to clarify the circumstances under which certain sales of a listed company’s securities will not be deemed to be equity compensation for purposes of that rule and to make a clarifying change in Section 312.04. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Section 303A.08 of the Manual to clarify the circumstances under which certain sales of a listed company’s securities will not be deemed to be equity compensation for purposes of that rule. Section 303A.08 provides that an ‘‘equity-compensation plan’’ is a plan or other arrangement that provides for the delivery of equity securities (either newly issued or treasury shares) of the listed company to any employee, director or other service provider as compensation for services. The adoption of an equity compensation plan under the rule—or any material revision to a plan—is subject to shareholder approval. However, Section 303A.08 E:\FR\FM\31MYN1.SGM 31MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Notices]
[Pages 25310-25313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11340]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85938; File No. SR-ICC-2019-005]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to ICC's Stress Testing 
Framework

May 24, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 16, 2019, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission the proposed rule change described 
in Items I, II, and III below, which Items have been prepared primarily 
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 Stress Testing Framework. 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, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. 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.

[[Page 25311]]

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

(a) Purpose
    ICC proposes revising its Stress Testing Framework. ICC believes 
such revisions will facilitate the prompt and accurate clearance and 
settlement of securities transactions and derivative agreements, 
contracts, and transactions for which it is responsible. The proposed 
revisions are described in detail as follows.
    ICC proposes changes to the Stress Testing Framework to enhance 
ICC's stress testing practices. The proposed changes strengthen the 
documentation surrounding ICC's stress testing methodology, including 
by introducing certain core concepts earlier in the Stress Testing 
Framework, updating terminology to maintain uniformity in the document, 
and providing additional clarity on the construction and reporting of 
stress scenarios. The proposed changes also remove a section that is no 
longer relevant and strengthen governance arrangements related to the 
identification and remediation of poor stress testing performance. ICC 
further proposes clarification and clean-up changes throughout the 
document to enhance readability. ICC proposes to make such changes 
effective following Commission approval of the proposed rule change.
    ICC proposes changes to the `Methodology' section of the Stress 
Testing Framework. Under the proposed changes, ICC will introduce its 
Cover-2 requirement, including related definitions, earlier in the 
document, noting that it establishes if financial resources will cover 
hypothetical losses associated with the two greatest Clearing 
Participant (``CP'') Affiliate Group (``AG'') uncollateralized stress 
losses associated with extreme but plausible scenarios. ICC proposes 
terminology updates, such as utilizing ``CP AG'' to reference CPs under 
a common parent entity, replacing a phrase with an abbreviation that 
was previously introduced, and shortening ``Lehman Brothers'' to 
``LB''. ICC proposes conforming changes throughout the document. ICC 
also proposes a clarification edit to specify the basis for ICC's 
stress testing practices.
    In the `Methodology' section, ICC proposes to introduce the forward 
looking (hypothetically constructed) scenarios. Under the proposed 
revisions, ICC will add language describing the forward looking 
(hypothetically constructed) scenarios and move two paragraphs on their 
construction from the `Predefined Scenarios' section to the 
`Methodology' section. ICC proposes edits for clarity and uniformity to 
such paragraphs, including referring to ``reference entity groups'' as 
``Risk Factor Groups'' \3\ (``RFGs''), which ICC also proposes to do 
throughout the document; defining a CP RFG as a CP AG; specifying the 
reference entities in a RFG for stress testing; and adding definite 
article ``the'' in the phrase ``as well as the peak''. ICC proposes to 
add language further explaining the calculation of Loss-Given-Default 
(``LGD'') and Expected LGD (``ELGD'') with respect to the forward 
looking (hypothetically constructed) scenarios.
---------------------------------------------------------------------------

    \3\ ICC deems each single name reference entity a Risk Factor. 
ICC deems a set of single name Risk Factors related by a common 
parental ownership structure a RFG.
---------------------------------------------------------------------------

    The proposed changes amend the `Predefined Scenarios' section. The 
proposed revisions indicate which scenarios are not expected to be 
realized as market outcomes and utilize bulleted lists to more clearly 
define the scenarios corresponding to the Historically Observed Extreme 
but Plausible Market Scenarios and the Historically Observed Extreme 
but Plausible Market Scenarios reflecting a baseline credit event. ICC 
proposes to cross-reference relevant sections when noting information 
found in those sections and make corresponding changes throughout the 
document. In describing the Hypothetically Constructed (Forward 
Looking) Extreme but Plausible Market Scenarios, ICC proposes to 
specifically refer to ``references entities'' as ``Single Name Risk 
Factors''; incorporate language on the associated adverse credit event 
analysis; and utilize a bulleted list to more clearly define the 
scenarios corresponding to the Hypothetically Constructed (Forward 
Looking) Extreme but Plausible Market Scenarios. In discussing the 
Extreme Model Response Test Scenarios, ICC proposes to add the word 
``Market'' to the phrase ``Historically Observed Extreme but Plausible 
Market scenarios'' and to utilize a bulleted list to more clearly 
define the scenarios corresponding to the Extreme Model Response Test 
Scenarios.
    The proposed amendments move the `General Wrong Way Risk and 
Contagion Stress Tests' section ahead of the adequacy and sensitivity 
analysis sections. The `General Wrong Way Risk and Contagion Stress 
Tests' section is currently located between the adequacy and 
sensitivity analysis sections, and ICC proposes that it follow the 
`Display of Discordant Behavior among Instrument Groups' section to 
avoid disrupting the grouping of adequacy and sensitivity analyses.
    ICC proposes to remove the `Correlation Sensitivity Analysis based 
on Monte Carlo Simulations' section. Given the transition from a 
stress-based methodology to a Monte Carlo simulations-based methodology 
for certain components of the Initial Margin model (the ``model''),\4\ 
references to the Monte Carlo sensitivity analysis as a stress testing 
analysis in the Stress Testing Framework are no longer relevant. ICC 
considers a sensitivity analysis of risk parameters to be more fitting 
and incorporated such analysis in the ICC Risk Parameter Setting and 
Review Policy, which describes the process of setting and reviewing the 
model core parameters and the performance of sensitivity analyses 
related to certain parameter settings.\5\
---------------------------------------------------------------------------

    \4\ See SR-ICC-2018-008 for a description of the transition from 
a stress-based approach to a Monte Carlo simulations-based 
methodology for the spread response and recovery rate sensitivity 
response components of the model.
    \5\ See SR-ICC-2019-002 for a description of the ICC Risk 
Parameter Setting and Review Policy.
---------------------------------------------------------------------------

    ICC proposes a clarification update to indicate which scenarios 
generally yield the greatest consumption of the Guaranty Fund in the 
`Recovery Rate Sensitivity Analysis' section and the `Interest Rate 
Sensitivity Analysis' section.
    ICC proposes amendments to the `Interpretation of Results' section. 
ICC proposes to incorporate language that more clearly defines the 
scenarios corresponding to the Historically Observed and Hypothetically 
Constructed Extreme but Plausible Scenarios. Under the proposed 
revisions, the ICC reports that are associated with stress scenarios 
are listed in a table, along with the reporting frequency and 
classification (e.g., extreme but plausible, extreme and not expected 
to be realized, etc.), and a paragraph on hypothetical losses follows 
the table given its connection to the stress scenarios in the table. 
ICC proposes clarification edits to this paragraph, such as replacing 
``total'' with ``sum'', adding a parenthetical, and more generally 
referring to powers of assessment. Further, ICC proposes that a 
paragraph describing a figure in the document appear before, instead of 
after, the figure and that such figure is re-numbered given the 
addition of the proposed table. With respect to stress test results, 
ICC proposes to specify that it considers hypothetical losses on a 
Cover-2 basis and to cross-reference a section on the remediation of 
poor stress testing performance. The proposed

[[Page 25312]]

changes also note that the Risk Department conducts monthly parameter 
reviews and parameter sensitivity analyses.
    ICC proposes amendments to the `Post-Stress Testing Review & 
Governance Structure' section. ICC proposes to cross-reference the 
table from the `Interpretation of Results' section when noting 
information depicted in the table and make corresponding changes 
throughout the document. ICC proposes to clarify the frequency at which 
stress testing results are reviewed and risk results and issues are 
discussed. ICC proposes to note the Risk Committee's role in ad hoc 
reviews of stress testing results undertaken by the Chief Risk Officer 
(``CRO'') or designee and to more clearly state that ICC conducts 
certain ``periodic'' reporting on a weekly basis. Also, the proposed 
changes provide clarification and direction with respect to poor stress 
testing performance, including by indicating that ICC considers stress 
test deficiencies on a Cover-2 basis, specifying the Risk Department's 
role in identifying poor stress testing performance, and explaining how 
the Risk Department determines poor stress testing performance. 
Moreover, the proposed revisions specifically provide the CRO and Risk 
Oversight Officer (``ROO'') with authority to determine poor stress 
testing performance and describe the actions to take upon identifying 
poor stress testing performance, including by the Risk Working Group 
(``RWG'') and the Risk Department. In addition, ICC proposes to replace 
certain general references to the Risk Department with more specific 
references to the CRO, or designee.
    ICC proposes to update the `References' section with two ICC 
policies that provide further information on ICC Risk Department 
practices, including the calculation of LGD and ELGD and the 
performance of monthly parameter reviews and parameter sensitivity 
analyses.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \6\ 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; 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),\7\ because ICC believes that the proposed rule change 
will promote the prompt and accurate clearance and settlement of 
securities transactions, derivatives agreements, contracts, and 
transactions, and 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. The proposed changes to 
the Stress Testing Framework strengthen the documentation surrounding 
ICC's stress testing methodology, including by introducing certain core 
concepts earlier in the document, updating terminology to maintain 
uniformity, and providing additional clarity on the construction and 
reporting of stress scenarios. The proposed changes remove information 
that is no longer relevant and strengthen governance arrangements 
related to the identification and remediation of poor stress testing 
performance, which serves to enhance ICC's approach to identifying 
potential weaknesses in the risk methodology. The clarification and 
clean-up changes that enhance readability further ensure that the 
documentation of ICC's Stress Testing Framework remains up-to-date, 
clear, and transparent. ICC believes that having policies and 
procedures that clearly and accurately document ICC's stress testing 
practices are 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 and the safeguarding of securities and 
funds associated with security-based swap transactions in ICC's custody 
or control, or for which ICC is responsible. As such, the proposed rule 
change is designed to promote the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions and 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 within the 
meaning of Section 17A(b)(3)(F) of the Act.\8\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ Id.
    \8\ Id.
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    In addition, the proposed revisions to the Stress Testing Framework 
are consistent with the relevant requirements of Rule 17Ad-22.\9\ Rule 
17Ad-22(b)(3) \10\ 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 proposed changes to the Stress 
Testing Framework provide further clarity and transparency regarding 
ICC's stress testing practices, including by strengthening the 
documentation surrounding ICC's stress testing methodology through the 
introduction of certain core concepts earlier in the document, updates 
to stress testing terminology to maintain uniformity, and additional 
clarity on the construction and reporting of stress testing scenarios. 
The proposed revisions also support ICC's ability to maintain 
sufficient risk requirements and enhance ICC's approach to identifying 
potential weaknesses in the risk management system by incorporating 
additional procedures related to the identification and remediation of 
poor stress testing performance, thereby ensuring that ICC maintains 
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).\11\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22.
    \10\ 17 CFR 240.17Ad-22(b)(3).
    \11\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(d)(8) \12\ 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.\13\ The proposed changes strengthen the governance arrangements 
set forth in the Stress Testing Framework by clearly assigning and 
documenting responsibility and accountability for the identification 
and remediation of poor stress testing performance. As such, these 
governance arrangements are clear and transparent, such that 
information relating to the assignment of responsibilities and the 
requisite involvement of the CRO, ROO, Risk Department, RWG, the Risk 
Committee, and the Board is clearly documented, consistent with the 
requirements of Rule 17Ad-22(d)(8).\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.17Ad-22(d)(8).
    \13\ 15 U.S.C. 78q-1.
    \14\ 17 CFR 240.17Ad-22(d)(8).

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[[Page 25313]]

(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 changes to 
ICC's Stress Testing Framework 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 [email protected]. Please include 
File Number SR-ICC-2019-005 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-2019-005. 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 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-2019-005 and should be 
submitted on or before June 21, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11340 Filed 5-30-19; 8:45 am]
BILLING CODE 8011-01-P

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