Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Recovery Plan and the ICC Wind-Down Plan, 17649-17654 [2021-06884]

Download as PDF Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES Service identifies the fact that most of its Bound Printed Matter Parcels volume originates from logistics entities with their own origin-through-last-mile delivery networks, and that the remaining volume almost entirely originates from other logistics entities and a small number of large customers. Id. at 10–14. The Postal Service notes that all of these logistics entities and other large customers would be able to divert volume to their own networks or else possess substantial negotiating power when seeking alternatives to the Postal Service. Id. at 10–12. In addition, the Postal Service states that the Private Express Statutes (PES) do not apply to the Bound Printed Matter Parcels product because the statutory definition of a ‘‘letter’’ explicitly excludes bound books, catalogs, and telephone directories that meet certain page requirements. Id. at 16. The Postal Service states that ‘‘any incidental First-Class matter in [Bound Printed Matter Parcels] falls within the exception for cargo’’ under the Commission’s regulations. Id. at 17. The Postal Service notes that Bound Printed Matter Parcels did not cover its attributable costs in 2020, but it seeks authority from the Commission as part of this transfer to set prices for Parcel Select Bound Printed Matter that would cover its attributable costs. Id. at 18. The Postal Service envisions setting prices for Parcel Select Bound Printed Matter in a competitive price adjustment following the transfer. Furthermore, the Postal Service asserts that after the addition of the Parcel Select Bound Printed Matter product, competitive products, as a whole, even in the absence of a price adjustment, will continue to contribute the necessary percentage towards total institutional costs. Id. at 18–19; see 39 U.S.C. 3633(a)(3), 39 CFR 3035.107. The Postal Service also asserts that transferring Bound Printed Matter Parcels to the Competitive product list will address an arbitrary distinction between parcels containing bound, printed matter and parcels containing other goods. Request at 19. II. Commission Action The Commission establishes Docket No. MC2021–78 to consider the Postal Service’s proposals described in its Request. Interested persons may submit comments on whether the Request is consistent with the policies of 39 U.S.C. 3632, 3633, and 3642 and 39 CFR 3040.130 et seq. Comments are due by May 7, 2021. The Request and related filings are available on the Commission’s website (http://www.prc.gov). The Commission VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 encourages interested persons to review the Request for further details. The Commission appoints Joseph K. Press to serve as Public Representative in this proceeding. III. Ordering Paragraphs It is ordered: 1. The Commission establishes Docket No. MC2021–78 for consideration of the matters raised by the United States Postal Service Request to Transfer Bound Printed Matter Parcels to the Competitive Product List, filed March 26, 2021. 2. Pursuant to 39 U.S.C. 505, Joseph K. Press is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding. 3. Comments by interested persons are due by May 7, 2021. 4. The Secretary shall arrange for publication of this order in the Federal Register. 17649 (a)(10), permit consideration of the scheduled matters at the closed meeting. The subject matter of the closed meeting will consist of the following topics: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Resolution of litigation claims; and Other matters relating to examinations and enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters. CONTACT PERSON FOR MORE INFORMATION: For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. Dated: April 1, 2021. Vanessa A. Countryman, Secretary. [FR Doc. 2021–07065 Filed 4–1–21; 4:15 pm] By the Commission. Jennie L. Jbara, Alternate Certifying Officer. BILLING CODE 8011–01–P [FR Doc. 2021–06879 Filed 4–2–21; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91439; File No. SR–ICC– 2021–005] SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings 2:00 p.m. on Thursday, April 8, 2021. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. STATUS: This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and TIME AND DATE: PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Recovery Plan and the ICC WindDown Plan March 30, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4,2 notice is hereby given that on March 23, 2021, 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 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 update and formalize the ICC Recovery Plan and the ICC Wind-Down Plan (collectively, the ‘‘Plans’’). These revisions do not require any changes to the ICC Clearing Rules (the ‘‘Rules’’). 1 15 2 17 E:\FR\FM\05APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 05APN1 17650 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices 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 jbell on DSKJLSW7X2PROD with NOTICES (a) Purpose ICC proposes to update and formalize the ICC Recovery Plan and the ICC Wind-Down Plan, which serve as plans for the recovery and orderly wind-down of ICC necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses, consistent with Rule 17ad–22(e)(3)(ii).3 ICC proposes to update and formalize the Plans following Commission approval of the proposed rule change. The proposed rule change is described in detail as follows. ICC Recovery Plan Consistent with the regulations applicable to ICC, the proposed Recovery Plan is designed to establish ICC’s actions to maintain its viability as a going concern to address any uncovered credit loss, liquidity shortfall, capital inadequacy, or business, operational or other structural weakness that threatens ICC’s viability. The purpose of the document is to describe the actions that would be taken to (i) restore ICC to a stable and sustainable condition in the event that it came under severe stress and (ii) maintain effective arrangements for ensuring that losses that threaten ICC’s viability as a going concern are allocated. The proposed Recovery Plan is divided into 14 sections, which are detailed below. The proposed Recovery Plan provides necessary background and context regarding ICC for recovery planning. Section 1 serves as an introduction that summarizes key aspects of ICC’s plan for recovery and explains the plan’s purpose. The Recovery Plan builds on ICC’s existing Rules and policies and procedures and describes the recovery tools available to ICC to continue to provide its sole critical operation, CDS clearing services. Section 2 provides an 3 17 CFR 240.17Ad–22(e)(3)(ii). VerDate Sep<11>2014 17:23 Apr 02, 2021 overview of ICC and the regulation to which it is subject, including key information regarding ICC’s ownership structure and regulatory registrations and designations. Section 3 discusses the regulatory requirements applicable to the Recovery Plan, including regulatory guidance from the Commission that ICC considered in writing the plan and applicable regulatory obligations, such as those under Rule 17ad–22(e)(3)(ii).4 The proposed Recovery Plan provides fundamental information about ICC’s organization and operation. Section 4 discusses the legal entities that are material to ICC for the Recovery Plan and the requirements for ICC’s Clearing Participants (‘‘CPs’’), such as operational capacity, financial responsibility and capital requirements. Section 4 also sets forth the governance arrangements and committees that have a direct and indirect role in default management and recovery, including the roles and responsibilities of the Board, Risk Committee, and CDS Default Committee, among others. The CDS Default Committee is responsible for assisting ICC during the execution of certain default management and recovery procedures and convenes upon the declaration of default. Section 4 details key performance metrics in respect of the services that ICC provides and ICC’s management of collateral, including the forms of collateral that ICC accepts to satisfy initial margin (‘‘IM’’) and guaranty fund (‘‘GF’’) requirements and the monitoring of collateral counterparties. Section 5 analyzes critical services that are necessary to continue daily operations of clearing services and are provided to ICC by Intercontinental Exchange, Inc. (‘‘ICE’’) or external third parties. The proposed Recovery Plan details interconnections and interdependencies between ICC and other entities, including operational and financial interconnections, in Section 6. The Recovery Plan considers the interconnection between ICE and ICC and details IT systems and applications critical to ICC’s clearing operations. The Recovery Plan describes how ICC monitors financial entities that have multiple roles and relationships with ICC. Section 6 further analyzes ICC’s contractual arrangements in the context of continuing services during recovery. The proposed Recovery Plan describes the potential stress scenarios that may prevent ICC from being able to meet obligations and provide services and the recovery tools available to ICC to address these stress scenarios. 4 Id. Jkt 253001 PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 Section 7 categorizes such stress scenarios into (i) uncovered credit losses and/or liquidity shortfalls triggered by a CP or multiple CPs defaulting (‘‘CP default stress scenario’’) and (ii) stress triggered by general business risks, operational risks, or other risks that may threaten ICC’s viability as a going concern, other than a CP default (‘‘non-CP default stress scenario’’). Section 7 discusses the monitoring mechanisms for both categories of scenarios and the process of notifying regulators of the initiation of the Recovery Plan. In Section 8, ICC defines the point at which recovery begins and ICC activates the Recovery Plan as well as who declares the activation of the Recovery Plan. Section 8 describes the recovery tools available to ICC. The tools to address credit losses in a CP default stress scenario are set forth in ICC’s Rules and procedures and would be summarized in the proposed Recovery Plan. Such tools include: • Auctions to close out a defaulter’s portfolio ((ICC Rule 20–605(d)(v) and (f)(ii)). To incentivize competitive bidding, contributions of non-defaulting CPs are subject to ‘‘juniorization’’ and applied using a defined default auction priority based on the competitiveness of their bids.5 • An insurance policy covering specified losses resulting from a CP default (‘‘CP default insurance’’) (ICC Rule 802). • CPs’ obligation to replenish their GF contribution to the required level in the event of any use of the GF contributions of non-defaulting CPs (ICC Rule 803(a)) and to make assessment contributions to the GF following a CP default and the consumption of the prefunded GF (ICC Rule 803(b)), subject to a cap. If the cap is reached, CPs may be required to provide additional IM (ICC Rule 806(e)) to ensure that ICC maintains compliance with minimum regulatory financial resources requirements. • Partial tear-up of remaining positions (ICC Rules 20–605(f)(iii) and 809) where ICC terminates positions of non-defaulting CPs that exactly offset those in the defaulter’s remaining portfolio. • Reduced gains distributions (‘‘RGD’’) (ICC Rule 808) for up to five consecutive business days, allowing ICC to reduce payment of variation, or mark5 ICC’s Default Auction Procedures—Initial Default Auctions and Secondary Auction Procedures are available at the following: https:// www.theice.com/publicdocs/ICC_Default_Auction_ Procedures.pdf and https://www.theice.com/ publicdocs/ICC_Secondary_Auction_ Procedures.pdf. E:\FR\FM\05APN1.SGM 05APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices to-market, gains that would otherwise be owed to CPs, as ICC attempts a secondary auction or conducts a partial tear-up. Section 8 also discusses the tools that are available to ICC to address a situation where ICC experiences liquidity shortfalls triggered by a default of one or more CPs and has insufficient liquid resources in the proper currency to meet payments obligations. These tools include entering into transactions to exchange certain sovereign debt securities for cash or to exchange U.S. dollar cash for Euro cash under one of ICC’s committed repurchase or committed foreign exchange agreements, respectively. Additionally, Section 8 discusses the tools that would be available to ICC in the event that ICC experiences severe stress triggered by a non-CP default stress scenario, including the application of resources from ICC (‘‘Loss Resources’’) and contributions from CPs (‘‘Loss Contributions’’) to address certain investment and custodial losses. ICC Rule 811 provides a mechanism for allocating investment losses and custodial losses as between ICC and CPs, with ICC being responsible for a first loss position up to the amount of defined resources and with CPs being responsible for the remaining loss, in proportion to and capped at their margin and GF contributions. Additional tools to address non-CP default stress scenarios include insurance coverage, seeking additional capital through the ICE group, renegotiating certain agreements, and reducing personnel and other expenses. The proposed Recovery Plan further memorializes key information for the purposes of recovery planning. In Section 9, ICC proposes to describe the governance arrangements that provide oversight and direction in respect of the Recovery Plan, including design, implementation, testing, review, and ongoing maintenance. Section 10 analyzes the financial resources maintained by ICC for recovery in compliance with relevant regulations, including the procedures to follow in case of any shortfall. This section also discusses the timing for implementing ICC’s recovery tools and ICC’s projected estimated recovery and wind-down costs. Section 11 provides financial information relevant to ICC and ICE. Section 12 sets forth key systems used by ICC to generate reports to monitor and support clearing operations. The appendices in Section 13 include a glossary, diagrams and charts of clearing processes and financial service providers, and analyses related to different stress scenarios and VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 recovery tools. Section 14 holds an index of exhibits to the proposed Recovery Plan. ICC Wind-Down Plan The proposed Wind-Down Plan is designed to establish how ICC could be wound-down in an orderly manner. The proposed Wind-Down Plan would be used in the event that the recovery actions in the proposed Recovery Plan failed to preserve ICC’s viability as a going concern (and therefore recovery was not possible) and resolution had not been triggered. The proposed WindDown Plan could also be used in the event that ICC made a business decision to exit all clearing activities. The document is divided into 12 sections, which are detailed below. Similar to the proposed Recovery Plan, the proposed Wind-Down Plan provides necessary background and context regarding ICC for wind-down planning. Section 1 serves as an introduction that summarizes key aspects of the Wind-Down Plan and explains the plan’s purpose. Section 2 provides an overview of ICC and the regulation to which it is subject. Section 3 describes the regulatory requirements applicable to the Wind-Down Plan, including regulatory guidance from the Commission that ICC considered in writing the plan and applicable regulatory obligations, such as those under Rule 17ad–22(e)(3)(ii).6 Section 4 sets out ICC’s CPs and the governance arrangements that are relevant to winddown, including the roles and responsibilities of the Board and Risk Committee. The proposed Wind-Down Plan describes the potential stress scenarios that may prevent ICC from being able to meet obligations and provide services, which may lead to wind-down. Section 5 categorizes the stress scenarios into (i) CP default stress scenarios and (ii) severe stress triggered by general business risks, operational risks, or other risks that may threaten ICC’s viability as a going concern, other than a CP default (‘‘non-CP default severe stress scenarios’’). Section 5 also discusses the triggering events for winddown, such as a critical reduction in market participation or a critical reduction in ICC’s financial resources below regulatory capital requirements. With respect to a business decision to wind-down, the triggering event would be the Board’s decision to exit the business. The proposed Wind-Down Plan provides the framework for wind-down and detailed plans for each wind-down 6 17 PO 00000 CFR 240.17Ad–22(e)(3)(ii). Frm 00066 Fmt 4703 Sfmt 4703 17651 option. Section 6 examines ICC’s winddown options that consist of a transfer of CDS clearing activities from ICC to an alternative clearinghouse, the sale of ICC to another entity, or the termination of open positions. Under the plan, before a wind-down decision would be made by the Board, ICC would consult with market participants, potential alternative clearing houses, and regulators, among others. The specific situation giving rise to the wind-down, together with the results of the consultation, would inform the specific wind-down option and corresponding execution plan. The Board would consider and approve the execution plan prior to implementation. Section 6 also details the plans for executing each wind-down option, including the approach, timeline, potential impediments, and other considerations. For transfer to be a viable wind-down option, ICC would need to locate an appropriate alternative clearing house that was willing and able to accept the transferred positions. Wind-down through the sale option would most likely be applicable in a non-default stress scenario where the financial assets of ICC became constrained and the recovery tools failed to restore ICC’s capital. Regarding termination, if CPs could not agree on an approach for liquidating/removing open cleared positions at ICC or did not fully voluntarily liquidate/remove their open positions by the deadline, the Board would tear-up any remaining open positions as permitted under ICC Rule 810. Under the proposed Wind-Down Plan, to the extent possible, the ability to continue providing centralized clearing of CDS with as little disruption as possible would be the primary determinant of feasibility for ICC’s wind-down options. If continuation was not feasible, the primary determinant would be the ability to discontinue CDS clearing services in an orderly manner with minimum negative impact to the marketplace and stakeholders. Where the Board makes a business decision to wind-down, wind-down would be executed using one or more of the winddown options listed above. Section 6 further discusses potential obstacles to an orderly wind-down. The proposed Wind-Down Plan also provides fundamental information about ICC’s organization and operation for the purposes of wind-down planning. Section 7 describes interconnections and interdependencies between ICC and other entities. Similar to the Recovery Plan, Section 7 discusses the legal entities that are material to ICC for the Wind-Down Plan, the critical services E:\FR\FM\05APN1.SGM 05APN1 17652 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES provided to ICC by ICE or external third parties, and ICC’s operational and financial interconnections. This section considers the interconnection between ICE and ICC, identifies critical service providers, details IT systems and applications critical to ICC’s clearing operations, and identifies financial entities that have multiple roles and relationships with ICC. Section 8 analyzes ICC’s contractual arrangements in the context of continuing services during wind-down. The proposed Wind-Down Plan further memorializes key information with respect to wind-down planning. Section 9 analyzes the financial resources maintained by ICC to support wind-down in compliance with relevant regulations, including the procedures to follow in case of any shortfall. This section also discusses the timing for executing the wind-down options and ICC’s projected estimated recovery and wind-down costs. In Section 10, ICC proposes to set out the governance arrangements that provide oversight and direction in respect of the Wind-Down Plan, including design, implementation, testing, review, and on-going maintenance. The appendices in Section 11 contain a glossary, diagrams and charts of clearing processes and financial service providers, and analyses related to different stress scenarios. Section 12 holds an index of exhibits to the proposed Wind-Down Plan. (b) Statutory Basis ICC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 7 and the regulations thereunder applicable to it, including the applicable standards under Rule 17Ad–22.8 In particular, Section 17A(b)(3)(F) of the Act 9 requires that the rule change be consistent with the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts and transactions cleared by ICC, the safeguarding of securities and funds in the custody or control of ICC or for which it is responsible, and the protection of investors and the public interest. As discussed herein, the proposed rule change would enhance ICC’s ability to effectuate a successful recovery by describing the actions that would be taken to restore ICC to a stable and sustainable condition in the event that it came under severe stress and maintain effective arrangements for ensuring that losses that threaten ICC’s viability as a going concern are allocated in the Recovery Plan. The proposed rule change would further enhance ICC’s ability to execute an orderly wind-down by establishing the actions that would be taken and the options that would be available to wind-down ICC in an orderly manner in the Wind-Down Plan. The proposed Plans would thus promote ICC’s ability to continue providing clearing services with as little disruption as possible, and should continuation not be feasible, promote ICC’s ability to discontinue clearing services in an orderly manner with minimum negative impact to the marketplace and stakeholders, thereby promoting the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions, the safeguarding of securities and funds in the custody or control of ICC or for which it is responsible, and the protection of investors and the public interest. Accordingly, in ICC’s view, the proposed rule change is consistent with the prompt and accurate clearance and settlement of securities transactions, derivatives agreements, contracts, and transactions, the safeguarding of securities and funds in the custody or control of ICC or for which it is responsible, and the protection of investors and the public interest, within the meaning of Section 17A(b)(3)(F) of the Act.10 The proposed rule change would also satisfy the relevant requirements of Rule 17Ad–22.11 Rule 17Ad–22(e)(2) 12 requires, in relevant part, each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide for governance arrangements that are (i) clear and transparent; (ii) clearly prioritize the safety and efficiency of the covered clearing agency; (iii) support the public interest requirements of Section 17A of the Act 13 applicable to clearing agencies, and the objectives of owners and participants; (v) specify clear and direct lines of responsibility; and (vi) consider the interests of participants’ customers, securities issuers and holders, and other relevant stakeholders of the covered clearing agency. The proposed Plans clearly and transparently set forth the governance arrangements that are relevant to recovery and wind-down, including the roles and responsibilities of the Board, applicable committees, and management. The proposed Plans assign and document responsibility and accountability for key recovery and wind-down decisions, such as activating the Recovery Plan and deciding to wind-down the business, and require consultation or approval from relevant parties. The governance arrangements set out in the documents are designed to provide meaningful consultation with stakeholders regarding key recovery and wind-down actions to ensure consideration of the interests of relevant stakeholders. Such governance arrangements further promote the safety and efficiency of ICC and support the public interest requirements in Section 17A of the Act 14 applicable to clearing agencies, and the objectives of owners and participants, by describing the roles and responsibilities of the Board, committees, and management to ensure that such groups have the appropriate knowledge and integrity necessary to discharge their responsibilities and to clearly prioritize the safety and efficiency of ICC so that it continues to provide safe and sound central counterparty services in the context of recovery or wind-down. As such, ICC believes that the proposed rule change is consistent with the requirements of Rule 17Ad–22(e)(2).15 Rule 17Ad–22(e)(3)(ii) 16 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which includes plans for the recovery and orderly wind-down of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses. As discussed above, the proposed Recovery Plan is designed to establish ICC’s actions to maintain its viability as a going concern to address any uncovered credit loss, liquidity shortfall, capital inadequacy, or business, operational or other structural weakness that threatens ICC’s viability. The proposed Wind-Down Plan is designed to establish how ICC could be wound-down in an orderly manner should its recovery efforts fail. The proposed Plans establish centralized sources of information on ICC’s recovery and wind-down actions, which would promote ICC’s ability to carry out a successful recovery or orderly wind-down and would also provide relevant information to 10 Id. 7 15 U.S.C. 78q–1. 8 17 CFR 240.17Ad–22. 9 15 U.S.C. 78q–1(b)(3)(F). VerDate Sep<11>2014 17:23 Apr 02, 2021 CFR 240.17Ad–22. CFR 240.17Ad–22(e)(2). 13 15 U.S.C. 78q–1. Jkt 253001 11 17 14 Id. 12 17 15 17 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 16 17 E:\FR\FM\05APN1.SGM CFR 240.17Ad–22(e)(2). CFR 240.17Ad–22(e)(3)(ii). 05APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices authorities needed for the purposes of recovery and wind-down planning. The proposed Recovery Plan includes potential stress scenarios that may prevent ICC from being able to meet obligations and provide services and the recovery tools available to ICC to address such scenarios, which would promote ICC’s ability to carry out a successful recovery. The proposed Wind-Down Plan also details potential stress scenarios and their triggering events and the plans for executing each wind-down option. Both Plans include analyses of ICC’s contractual arrangements in the context of continuing services during recovery or wind-down. The proposed rule change would thus enhance ICC’s recovery efforts and ICC’s ability to carry out an orderly wind-down, including by documenting ICC’s preparations for recovery and wind-down and by describing the actions that ICC may take to effect a successful recovery or orderly wind-down, consistent with the requirements of Rule 17Ad– 22(e)(3)(ii).17 Rule 17Ad–22(e)(15) 18 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to identify monitor, and manage the covered clearing agency’s general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses so that the covered clearing agency can continue operations and services as a going concern if those losses materialize, including by (i) determining the amount of liquid net assets funded by equity based upon its general business risk profile and the length of time required to achieve a recovery or orderly wind-down, as appropriate, of its critical operations and services if such action is taken; (ii) holding liquid net assets funded by equity equal to the greater of either (x) six months of the covered clearing agency’s current operating expenses, or (y) the amount determined by the Board to be sufficient to ensure a recovery or orderly wind-down of critical operations and services of the covered clearing agency, as contemplated by the plans established under Rule 17ad– 22(e)(3)(ii); and (iii) maintain a viable plan, approved by the Board and updated at least annually, for raising additional equity should its equity fall close to or below the amount required under Rule 17ad–22(e)(15)(ii). The proposed Plans analyze ICC’s particular circumstances and risks to ensure that ICC maintains financial resources necessary to implement both Plans and that ICC remains in compliance with all regulatory capital requirements. The proposed Plans analyze the financial resources maintained by ICC for recovery and to support wind-down in compliance with relevant regulations and include procedures to follow in case of any shortfall. Moreover, the proposed Plans discuss ICC’s timing for implementing the recovery tools and for executing the wind-down options as well as ICC’s determination of the projected estimated recovery and winddown costs. These documents, including the analyses and estimations contained therein, are further updated and subject to review and approval by the Board at least annually and ensure that ICC holds sufficient liquid net assets to achieve recovery or orderly wind-down. As such, ICC believes that the proposed rule change is consistent with the requirements of Rule 17Ad– 22(e)(15).19 (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 rule change to update and formalize the Plans will apply uniformly across all market participants. Therefore, ICC does not believe the proposed rule change would impose 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 17 Id. 18 17 CFR 240.17Ad–22(e)(15). VerDate Sep<11>2014 17:23 Apr 02, 2021 19 Id. Jkt 253001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 17653 (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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ICC–2021–005 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–2021–005. 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 (http://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–2021–005 and should be submitted on or before April 26, 2021. E:\FR\FM\05APN1.SGM 05APN1 17654 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. SECURITIES AND EXCHANGE COMMISSION [FR Doc. 2021–06884 Filed 4–2–21; 8:45 am] Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Transaction Fees Pursuant to IEX Rule 15.110 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91443; File No. SR–IEX– 2021–05] March 30, 2021. Sunshine Act Meetings 2:30 p.m. on Thursday, April 1, 2021. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. STATUS: This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. The subject matter of the closed meeting will consist of the following topics: Matters related to litigation; and Other matters relating to examinations and enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters. CONTACT PERSON FOR MORE INFORMATION: For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. jbell on DSKJLSW7X2PROD with NOTICES TIME AND DATE: Dated: April 1, 2021. Vanessa A. Countryman, Secretary. [FR Doc. 2021–07081 Filed 4–1–21; 4:15 pm] BILLING CODE 8011–01–P 20 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 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 March 23, 2021, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the 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 Pursuant to the provisions of Section 19(b)(1) under the Act,3 and Rule 19b–4 thereunder,4 IEX is filing with the Commission a proposed rule change to amend its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c) (the ‘‘Fee Schedule’’), to modify the fees applicable to executions of and with displayed orders for securities priced at or above $1.00 per share, and to make several related and conforming changes. Changes to the Fee Schedule pursuant to this proposal are effective upon filing,5 and the Exchange plans to implement the changes on April 1, 2021. The text of the proposed rule change is available at the Exchange’s website at www.iextrading.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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b–4. 5 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 of these statements may be examined at the places specified in Item IV below. The self-regulatory organization 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 The Exchange proposes to amend its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c), to modify the fees applicable to executions of and with displayable orders for securities priced at or above $1.00 per share, and to make several related and conforming changes. Specifically, the Exchange proposes not to charge Members 6 a fee for executions of orders that provide displayed liquidity, and proposes to charge a fee of $0.0006 per share for executions of orders that remove displayed liquidity, unless a lower fee applies.7 In addition, the Exchange proposes to revise the existing internalization fee, 8 which currently provides that there is no fee for executions when the adding and removing order originated from the same Member, to apply the proposed fees for adding and removing displayed liquidity provided by the same Member, while continuing to offer free executions for adding and removing non-displayed liquidity provided by the same Member. Currently, the Exchange charges a fee of $0.0003 per share for an execution at or above $1.00 that adds or removes displayed liquidity and charges a fee of $0.0009 per share for an execution at or above $1.00 that adds or removes nondisplayed liquidity. However, pursuant to a pricing incentive adopted when the Exchange began to offer D-Limit orders,9 a displayed or non-displayed D-Limit order 10 that provides liquidity and is executed at a price at or above $1.00 results in a free execution. As proposed, all displayed orders that provide liquidity will execute free of charge, and all orders that remove displayed liquidity will be charged a fee of $0.0006 per share, with the exception that executions below $1.00 will continue to be assessed a fee of 0.30% of the total dollar value of the execution 6 See IEX Rule 1.160(s). example, as discussed infra, if a Retail order removes displayed liquidity, the Retail order would not be charged a fee. 8 The internalization fee code is applied to orders in which the Member executes against resting liquidity added by such Member. 9 See Securities Exchange Act Release No. 89967 (September 23, 2020), 85 FR 63616 (October 8, 2020) (SR–IEX–2020–14). 10 See IEX Rule 11.190(b)(7). 7 For E:\FR\FM\05APN1.SGM 05APN1

Agencies

[Federal Register Volume 86, Number 63 (Monday, April 5, 2021)]
[Notices]
[Pages 17649-17654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06884]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91439; File No. SR-ICC-2021-005]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC Recovery Plan and 
the ICC Wind-Down Plan

March 30, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4,\2\ notice is hereby given that on March 
23, 2021, 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 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.
---------------------------------------------------------------------------

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 update and 
formalize the ICC Recovery Plan and the ICC Wind-Down Plan 
(collectively, the ``Plans''). These revisions do not require any 
changes to the ICC Clearing Rules (the ``Rules'').

[[Page 17650]]

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 update and formalize the ICC Recovery Plan and the 
ICC Wind-Down Plan, which serve as plans for the recovery and orderly 
wind-down of ICC necessitated by credit losses, liquidity shortfalls, 
losses from general business risk, or any other losses, consistent with 
Rule 17ad-22(e)(3)(ii).\3\ ICC proposes to update and formalize the 
Plans following Commission approval of the proposed rule change. The 
proposed rule change is described in detail as follows.
---------------------------------------------------------------------------

    \3\ 17 CFR 240.17Ad-22(e)(3)(ii).
---------------------------------------------------------------------------

ICC Recovery Plan
    Consistent with the regulations applicable to ICC, the proposed 
Recovery Plan is designed to establish ICC's actions to maintain its 
viability as a going concern to address any uncovered credit loss, 
liquidity shortfall, capital inadequacy, or business, operational or 
other structural weakness that threatens ICC's viability. The purpose 
of the document is to describe the actions that would be taken to (i) 
restore ICC to a stable and sustainable condition in the event that it 
came under severe stress and (ii) maintain effective arrangements for 
ensuring that losses that threaten ICC's viability as a going concern 
are allocated. The proposed Recovery Plan is divided into 14 sections, 
which are detailed below.
    The proposed Recovery Plan provides necessary background and 
context regarding ICC for recovery planning. Section 1 serves as an 
introduction that summarizes key aspects of ICC's plan for recovery and 
explains the plan's purpose. The Recovery Plan builds on ICC's existing 
Rules and policies and procedures and describes the recovery tools 
available to ICC to continue to provide its sole critical operation, 
CDS clearing services. Section 2 provides an overview of ICC and the 
regulation to which it is subject, including key information regarding 
ICC's ownership structure and regulatory registrations and 
designations. Section 3 discusses the regulatory requirements 
applicable to the Recovery Plan, including regulatory guidance from the 
Commission that ICC considered in writing the plan and applicable 
regulatory obligations, such as those under Rule 17ad-22(e)(3)(ii).\4\
---------------------------------------------------------------------------

    \4\ Id.
---------------------------------------------------------------------------

    The proposed Recovery Plan provides fundamental information about 
ICC's organization and operation. Section 4 discusses the legal 
entities that are material to ICC for the Recovery Plan and the 
requirements for ICC's Clearing Participants (``CPs''), such as 
operational capacity, financial responsibility and capital 
requirements. Section 4 also sets forth the governance arrangements and 
committees that have a direct and indirect role in default management 
and recovery, including the roles and responsibilities of the Board, 
Risk Committee, and CDS Default Committee, among others. The CDS 
Default Committee is responsible for assisting ICC during the execution 
of certain default management and recovery procedures and convenes upon 
the declaration of default. Section 4 details key performance metrics 
in respect of the services that ICC provides and ICC's management of 
collateral, including the forms of collateral that ICC accepts to 
satisfy initial margin (``IM'') and guaranty fund (``GF'') requirements 
and the monitoring of collateral counterparties. Section 5 analyzes 
critical services that are necessary to continue daily operations of 
clearing services and are provided to ICC by Intercontinental Exchange, 
Inc. (``ICE'') or external third parties.
    The proposed Recovery Plan details interconnections and 
interdependencies between ICC and other entities, including operational 
and financial interconnections, in Section 6. The Recovery Plan 
considers the interconnection between ICE and ICC and details IT 
systems and applications critical to ICC's clearing operations. The 
Recovery Plan describes how ICC monitors financial entities that have 
multiple roles and relationships with ICC. Section 6 further analyzes 
ICC's contractual arrangements in the context of continuing services 
during recovery.
    The proposed Recovery Plan describes the potential stress scenarios 
that may prevent ICC from being able to meet obligations and provide 
services and the recovery tools available to ICC to address these 
stress scenarios. Section 7 categorizes such stress scenarios into (i) 
uncovered credit losses and/or liquidity shortfalls triggered by a CP 
or multiple CPs defaulting (``CP default stress scenario'') and (ii) 
stress triggered by general business risks, operational risks, or other 
risks that may threaten ICC's viability as a going concern, other than 
a CP default (``non-CP default stress scenario''). Section 7 discusses 
the monitoring mechanisms for both categories of scenarios and the 
process of notifying regulators of the initiation of the Recovery Plan. 
In Section 8, ICC defines the point at which recovery begins and ICC 
activates the Recovery Plan as well as who declares the activation of 
the Recovery Plan.
    Section 8 describes the recovery tools available to ICC. The tools 
to address credit losses in a CP default stress scenario are set forth 
in ICC's Rules and procedures and would be summarized in the proposed 
Recovery Plan. Such tools include:
     Auctions to close out a defaulter's portfolio ((ICC Rule 
20-605(d)(v) and (f)(ii)). To incentivize competitive bidding, 
contributions of non-defaulting CPs are subject to ``juniorization'' 
and applied using a defined default auction priority based on the 
competitiveness of their bids.\5\
---------------------------------------------------------------------------

    \5\ ICC's Default Auction Procedures--Initial Default Auctions 
and Secondary Auction Procedures are available at the following: 
https://www.theice.com/publicdocs/ICC_Default_Auction_Procedures.pdf 
and https://www.theice.com/publicdocs/ICC_Secondary_Auction_Procedures.pdf.
---------------------------------------------------------------------------

     An insurance policy covering specified losses resulting 
from a CP default (``CP default insurance'') (ICC Rule 802).
     CPs' obligation to replenish their GF contribution to the 
required level in the event of any use of the GF contributions of non-
defaulting CPs (ICC Rule 803(a)) and to make assessment contributions 
to the GF following a CP default and the consumption of the pre-funded 
GF (ICC Rule 803(b)), subject to a cap. If the cap is reached, CPs may 
be required to provide additional IM (ICC Rule 806(e)) to ensure that 
ICC maintains compliance with minimum regulatory financial resources 
requirements.
     Partial tear-up of remaining positions (ICC Rules 20-
605(f)(iii) and 809) where ICC terminates positions of non-defaulting 
CPs that exactly offset those in the defaulter's remaining portfolio.
     Reduced gains distributions (``RGD'') (ICC Rule 808) for 
up to five consecutive business days, allowing ICC to reduce payment of 
variation, or mark-

[[Page 17651]]

to-market, gains that would otherwise be owed to CPs, as ICC attempts a 
secondary auction or conducts a partial tear-up.

Section 8 also discusses the tools that are available to ICC to address 
a situation where ICC experiences liquidity shortfalls triggered by a 
default of one or more CPs and has insufficient liquid resources in the 
proper currency to meet payments obligations. These tools include 
entering into transactions to exchange certain sovereign debt 
securities for cash or to exchange U.S. dollar cash for Euro cash under 
one of ICC's committed repurchase or committed foreign exchange 
agreements, respectively.
    Additionally, Section 8 discusses the tools that would be available 
to ICC in the event that ICC experiences severe stress triggered by a 
non-CP default stress scenario, including the application of resources 
from ICC (``Loss Resources'') and contributions from CPs (``Loss 
Contributions'') to address certain investment and custodial losses. 
ICC Rule 811 provides a mechanism for allocating investment losses and 
custodial losses as between ICC and CPs, with ICC being responsible for 
a first loss position up to the amount of defined resources and with 
CPs being responsible for the remaining loss, in proportion to and 
capped at their margin and GF contributions. Additional tools to 
address non-CP default stress scenarios include insurance coverage, 
seeking additional capital through the ICE group, renegotiating certain 
agreements, and reducing personnel and other expenses.
    The proposed Recovery Plan further memorializes key information for 
the purposes of recovery planning. In Section 9, ICC proposes to 
describe the governance arrangements that provide oversight and 
direction in respect of the Recovery Plan, including design, 
implementation, testing, review, and on-going maintenance. Section 10 
analyzes the financial resources maintained by ICC for recovery in 
compliance with relevant regulations, including the procedures to 
follow in case of any shortfall. This section also discusses the timing 
for implementing ICC's recovery tools and ICC's projected estimated 
recovery and wind-down costs. Section 11 provides financial information 
relevant to ICC and ICE. Section 12 sets forth key systems used by ICC 
to generate reports to monitor and support clearing operations. The 
appendices in Section 13 include a glossary, diagrams and charts of 
clearing processes and financial service providers, and analyses 
related to different stress scenarios and recovery tools. Section 14 
holds an index of exhibits to the proposed Recovery Plan.
ICC Wind-Down Plan
    The proposed Wind-Down Plan is designed to establish how ICC could 
be wound-down in an orderly manner. The proposed Wind-Down Plan would 
be used in the event that the recovery actions in the proposed Recovery 
Plan failed to preserve ICC's viability as a going concern (and 
therefore recovery was not possible) and resolution had not been 
triggered. The proposed Wind-Down Plan could also be used in the event 
that ICC made a business decision to exit all clearing activities. The 
document is divided into 12 sections, which are detailed below.
    Similar to the proposed Recovery Plan, the proposed Wind-Down Plan 
provides necessary background and context regarding ICC for wind-down 
planning. Section 1 serves as an introduction that summarizes key 
aspects of the Wind-Down Plan and explains the plan's purpose. Section 
2 provides an overview of ICC and the regulation to which it is 
subject. Section 3 describes the regulatory requirements applicable to 
the Wind-Down Plan, including regulatory guidance from the Commission 
that ICC considered in writing the plan and applicable regulatory 
obligations, such as those under Rule 17ad-22(e)(3)(ii).\6\ Section 4 
sets out ICC's CPs and the governance arrangements that are relevant to 
wind-down, including the roles and responsibilities of the Board and 
Risk Committee.
---------------------------------------------------------------------------

    \6\ 17 CFR 240.17Ad-22(e)(3)(ii).
---------------------------------------------------------------------------

    The proposed Wind-Down Plan describes the potential stress 
scenarios that may prevent ICC from being able to meet obligations and 
provide services, which may lead to wind-down. Section 5 categorizes 
the stress scenarios into (i) CP default stress scenarios and (ii) 
severe stress triggered by general business risks, operational risks, 
or other risks that may threaten ICC's viability as a going concern, 
other than a CP default (``non-CP default severe stress scenarios''). 
Section 5 also discusses the triggering events for wind-down, such as a 
critical reduction in market participation or a critical reduction in 
ICC's financial resources below regulatory capital requirements. With 
respect to a business decision to wind-down, the triggering event would 
be the Board's decision to exit the business.
    The proposed Wind-Down Plan provides the framework for wind-down 
and detailed plans for each wind-down option. Section 6 examines ICC's 
wind-down options that consist of a transfer of CDS clearing activities 
from ICC to an alternative clearinghouse, the sale of ICC to another 
entity, or the termination of open positions. Under the plan, before a 
wind-down decision would be made by the Board, ICC would consult with 
market participants, potential alternative clearing houses, and 
regulators, among others. The specific situation giving rise to the 
wind-down, together with the results of the consultation, would inform 
the specific wind-down option and corresponding execution plan. The 
Board would consider and approve the execution plan prior to 
implementation. Section 6 also details the plans for executing each 
wind-down option, including the approach, timeline, potential 
impediments, and other considerations. For transfer to be a viable 
wind-down option, ICC would need to locate an appropriate alternative 
clearing house that was willing and able to accept the transferred 
positions. Wind-down through the sale option would most likely be 
applicable in a non-default stress scenario where the financial assets 
of ICC became constrained and the recovery tools failed to restore 
ICC's capital. Regarding termination, if CPs could not agree on an 
approach for liquidating/removing open cleared positions at ICC or did 
not fully voluntarily liquidate/remove their open positions by the 
deadline, the Board would tear-up any remaining open positions as 
permitted under ICC Rule 810. Under the proposed Wind-Down Plan, to the 
extent possible, the ability to continue providing centralized clearing 
of CDS with as little disruption as possible would be the primary 
determinant of feasibility for ICC's wind-down options. If continuation 
was not feasible, the primary determinant would be the ability to 
discontinue CDS clearing services in an orderly manner with minimum 
negative impact to the marketplace and stakeholders. Where the Board 
makes a business decision to wind-down, wind-down would be executed 
using one or more of the wind-down options listed above. Section 6 
further discusses potential obstacles to an orderly wind-down.
    The proposed Wind-Down Plan also provides fundamental information 
about ICC's organization and operation for the purposes of wind-down 
planning. Section 7 describes interconnections and interdependencies 
between ICC and other entities. Similar to the Recovery Plan, Section 7 
discusses the legal entities that are material to ICC for the Wind-Down 
Plan, the critical services

[[Page 17652]]

provided to ICC by ICE or external third parties, and ICC's operational 
and financial interconnections. This section considers the 
interconnection between ICE and ICC, identifies critical service 
providers, details IT systems and applications critical to ICC's 
clearing operations, and identifies financial entities that have 
multiple roles and relationships with ICC. Section 8 analyzes ICC's 
contractual arrangements in the context of continuing services during 
wind-down.
    The proposed Wind-Down Plan further memorializes key information 
with respect to wind-down planning. Section 9 analyzes the financial 
resources maintained by ICC to support wind-down in compliance with 
relevant regulations, including the procedures to follow in case of any 
shortfall. This section also discusses the timing for executing the 
wind-down options and ICC's projected estimated recovery and wind-down 
costs. In Section 10, ICC proposes to set out the governance 
arrangements that provide oversight and direction in respect of the 
Wind-Down Plan, including design, implementation, testing, review, and 
on-going maintenance. The appendices in Section 11 contain a glossary, 
diagrams and charts of clearing processes and financial service 
providers, and analyses related to different stress scenarios. Section 
12 holds an index of exhibits to the proposed Wind-Down Plan.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\8\ In particular, Section 17A(b)(3)(F) of the Act \9\ 
requires that the rule change be consistent with the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICC, the 
safeguarding of securities and funds in the custody or control of ICC 
or for which it is responsible, and the protection of investors and the 
public interest. As discussed herein, the proposed rule change would 
enhance ICC's ability to effectuate a successful recovery by describing 
the actions that would be taken to restore ICC to a stable and 
sustainable condition in the event that it came under severe stress and 
maintain effective arrangements for ensuring that losses that threaten 
ICC's viability as a going concern are allocated in the Recovery Plan. 
The proposed rule change would further enhance ICC's ability to execute 
an orderly wind-down by establishing the actions that would be taken 
and the options that would be available to wind-down ICC in an orderly 
manner in the Wind-Down Plan. The proposed Plans would thus promote 
ICC's ability to continue providing clearing services with as little 
disruption as possible, and should continuation not be feasible, 
promote ICC's ability to discontinue clearing services in an orderly 
manner with minimum negative impact to the marketplace and 
stakeholders, thereby promoting the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions, the safeguarding of securities and funds 
in the custody or control of ICC or for which it is responsible, and 
the protection of investors and the public interest. Accordingly, in 
ICC's view, the proposed rule change is consistent with the prompt and 
accurate clearance and settlement of securities transactions, 
derivatives agreements, contracts, and transactions, the safeguarding 
of securities and funds in the custody or control of ICC or for which 
it is responsible, and the protection of investors and the public 
interest, within the meaning of Section 17A(b)(3)(F) of the Act.\10\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
    \8\ 17 CFR 240.17Ad-22.
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ Id.
---------------------------------------------------------------------------

    The proposed rule change would also satisfy the relevant 
requirements of Rule 17Ad-22.\11\ Rule 17Ad-22(e)(2) \12\ requires, in 
relevant part, each covered clearing agency to establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to provide for governance arrangements that are (i) clear and 
transparent; (ii) clearly prioritize the safety and efficiency of the 
covered clearing agency; (iii) support the public interest requirements 
of Section 17A of the Act \13\ applicable to clearing agencies, and the 
objectives of owners and participants; (v) specify clear and direct 
lines of responsibility; and (vi) consider the interests of 
participants' customers, securities issuers and holders, and other 
relevant stakeholders of the covered clearing agency. The proposed 
Plans clearly and transparently set forth the governance arrangements 
that are relevant to recovery and wind-down, including the roles and 
responsibilities of the Board, applicable committees, and management. 
The proposed Plans assign and document responsibility and 
accountability for key recovery and wind-down decisions, such as 
activating the Recovery Plan and deciding to wind-down the business, 
and require consultation or approval from relevant parties. The 
governance arrangements set out in the documents are designed to 
provide meaningful consultation with stakeholders regarding key 
recovery and wind-down actions to ensure consideration of the interests 
of relevant stakeholders. Such governance arrangements further promote 
the safety and efficiency of ICC and support the public interest 
requirements in Section 17A of the Act \14\ applicable to clearing 
agencies, and the objectives of owners and participants, by describing 
the roles and responsibilities of the Board, committees, and management 
to ensure that such groups have the appropriate knowledge and integrity 
necessary to discharge their responsibilities and to clearly prioritize 
the safety and efficiency of ICC so that it continues to provide safe 
and sound central counterparty services in the context of recovery or 
wind-down. As such, ICC believes that the proposed rule change is 
consistent with the requirements of Rule 17Ad-22(e)(2).\15\
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    \11\ 17 CFR 240.17Ad-22.
    \12\ 17 CFR 240.17Ad-22(e)(2).
    \13\ 15 U.S.C. 78q-1.
    \14\ Id.
    \15\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(3)(ii) \16\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to maintain a sound risk management 
framework for comprehensively managing legal, credit, liquidity, 
operational, general business, investment, custody, and other risks 
that arise in or are borne by the covered clearing agency, which 
includes plans for the recovery and orderly wind-down of the covered 
clearing agency necessitated by credit losses, liquidity shortfalls, 
losses from general business risk, or any other losses. As discussed 
above, the proposed Recovery Plan is designed to establish ICC's 
actions to maintain its viability as a going concern to address any 
uncovered credit loss, liquidity shortfall, capital inadequacy, or 
business, operational or other structural weakness that threatens ICC's 
viability. The proposed Wind-Down Plan is designed to establish how ICC 
could be wound-down in an orderly manner should its recovery efforts 
fail. The proposed Plans establish centralized sources of information 
on ICC's recovery and wind-down actions, which would promote ICC's 
ability to carry out a successful recovery or orderly wind-down and 
would also provide relevant information to

[[Page 17653]]

authorities needed for the purposes of recovery and wind-down planning. 
The proposed Recovery Plan includes potential stress scenarios that may 
prevent ICC from being able to meet obligations and provide services 
and the recovery tools available to ICC to address such scenarios, 
which would promote ICC's ability to carry out a successful recovery. 
The proposed Wind-Down Plan also details potential stress scenarios and 
their triggering events and the plans for executing each wind-down 
option. Both Plans include analyses of ICC's contractual arrangements 
in the context of continuing services during recovery or wind-down. The 
proposed rule change would thus enhance ICC's recovery efforts and 
ICC's ability to carry out an orderly wind-down, including by 
documenting ICC's preparations for recovery and wind-down and by 
describing the actions that ICC may take to effect a successful 
recovery or orderly wind-down, consistent with the requirements of Rule 
17Ad-22(e)(3)(ii).\17\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \17\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(15) \18\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to identify monitor, and manage the 
covered clearing agency's general business risk and hold sufficient 
liquid net assets funded by equity to cover potential general business 
losses so that the covered clearing agency can continue operations and 
services as a going concern if those losses materialize, including by 
(i) determining the amount of liquid net assets funded by equity based 
upon its general business risk profile and the length of time required 
to achieve a recovery or orderly wind-down, as appropriate, of its 
critical operations and services if such action is taken; (ii) holding 
liquid net assets funded by equity equal to the greater of either (x) 
six months of the covered clearing agency's current operating expenses, 
or (y) the amount determined by the Board to be sufficient to ensure a 
recovery or orderly wind-down of critical operations and services of 
the covered clearing agency, as contemplated by the plans established 
under Rule 17ad-22(e)(3)(ii); and (iii) maintain a viable plan, 
approved by the Board and updated at least annually, for raising 
additional equity should its equity fall close to or below the amount 
required under Rule 17ad-22(e)(15)(ii). The proposed Plans analyze 
ICC's particular circumstances and risks to ensure that ICC maintains 
financial resources necessary to implement both Plans and that ICC 
remains in compliance with all regulatory capital requirements. The 
proposed Plans analyze the financial resources maintained by ICC for 
recovery and to support wind-down in compliance with relevant 
regulations and include procedures to follow in case of any shortfall. 
Moreover, the proposed Plans discuss ICC's timing for implementing the 
recovery tools and for executing the wind-down options as well as ICC's 
determination of the projected estimated recovery and wind-down costs. 
These documents, including the analyses and estimations contained 
therein, are further updated and subject to review and approval by the 
Board at least annually and ensure that ICC holds sufficient liquid net 
assets to achieve recovery or orderly wind-down. As such, ICC believes 
that the proposed rule change is consistent with the requirements of 
Rule 17Ad-22(e)(15).\19\
---------------------------------------------------------------------------

    \18\ 17 CFR 240.17Ad-22(e)(15).
    \19\ Id.
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(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 rule change 
to update and formalize the Plans will apply uniformly across all 
market participants. Therefore, ICC does not believe the proposed rule 
change would impose 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICC-2021-005 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-2021-005. 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 (http://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-2021-005 and should be 
submitted on or before April 26, 2021.


[[Page 17654]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06884 Filed 4-2-21; 8:45 am]
BILLING CODE 8011-01-P