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]
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Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices
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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
(https://www.prc.gov). The Commission
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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:
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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
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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
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(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).
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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.
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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.
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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
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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
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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
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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).
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CFR 240.17Ad–22.
CFR 240.17Ad–22(e)(2).
13 15 U.S.C. 78q–1.
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14 Id.
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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).
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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 (https://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 (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–2021–005 and
should be submitted on or before April
26, 2021.
E:\FR\FM\05APN1.SGM
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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
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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
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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
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]]>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]
-----------------------------------------------------------------------
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\
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\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.
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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).
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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\
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\16\ 17 CFR 240.17Ad-22(e)(3)(ii).
\17\ Id.
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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\
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\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 (https://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 (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-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
