Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICC Risk Parameter Setting and Review Policy, 28425-28427 [2021-11083]

Download as PDF Federal Register / Vol. 86, No. 100 / Wednesday, May 26, 2021 / Notices The level of the SPIKES Index and the VIX is available from Bloomberg and Reuters. Price information regarding cleared VIX swap contracts is available from major market data vendors. Price information regarding VIX futures is available from the Cboe Futures Exchange and from major market data vendors. Price information for cash equivalents is available from major market data vendors. Price information for non-exchange-traded VIX swap contracts may be obtained from brokers and dealers who make markets in such instruments. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last-sale information regarding the Shares will be disseminated through the facilities of the CTA. The IFV will be available through on-line information services. Moreover, prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of Trust Issued Receipts based on prices related to market volatility that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of Trust Issued Receipts based on prices related to market volatility and that will enhance competition among market participants, to the benefit of investors and the marketplace. VerDate Sep<11>2014 20:00 May 25, 2021 Jkt 253001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. 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 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 the 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: 28425 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 the filing also will be available for inspection and copying at the principal office of the Exchange. 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–NYSEArca–2021–28 and should be submitted on or before June 16, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–11079 Filed 5–25–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91951; File No. SR–ICC– 2021–009] 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– NYSEArca–2021–28 on the subject line. Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICC Risk Parameter Setting and Review Policy Paper Comments I. Introduction • Send paper comments in triplicate to: Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2021–28. 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 On April 2, 2021, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to make changes to ICC’s Risk Parameter Setting and Review Policy (‘‘RPSRP’’). The proposed rule change was published for comment in the Federal Register on April 14, 2021.3 The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 May 20, 2021. 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 ICC Risk Parameter Setting and Review Policy, Exchange Act Release No. 91517 (April 8, 2021), 86 FR 19667 (April 14, 2021) (SR–ICC–2021–009) (‘‘Notice’’). 1 15 E:\FR\FM\26MYN1.SGM 26MYN1 28426 Federal Register / Vol. 86, No. 100 / Wednesday, May 26, 2021 / Notices II. Description of the Proposed Rule Change ICC is proposing to revise its RPSRP, which describes the process of setting and reviewing the risk management model core parameters and the performance of sensitivity analyses related to certain parameter settings. Specifically, the proposed rule change would amend the ‘‘Univariate Level Parameters’’ subsection (Subsection 1.7.1) related to the univariate level parameters associated with the integrated spread response model component.4 Namely, ICC proposes to transition the risk management mean absolute deviation (‘‘MAD’’) monthly parameter update for index risk factors to an automatic daily update in the risk management system. The proposed changes would also specify that single name risk factor level risk management MADs are not subject to automatic updates and that the ICC Risk Department estimates and reviews the univariate single name integrated spread response parameters and their assumptions at least on a monthly basis. Further, the proposed rule change would make minor clarifications to the ‘‘Implied Distribution Parameters for Index Option Instruments’’ subsection (Subsection 1.7.4). Specifically, ICC previously replaced naming conventions used in the RPSRP for stress scenarios associated with the Lehman Brothers (‘‘LB’’) default with more generic naming conventions associated with extreme price changes, namely extreme price decreases and increases (the ‘‘Extreme Price Change Scenarios’’). The proposed rule change would make minor updates to replace references and notations to the scenarios associated with the LB default with the Extreme Price Change Scenarios. ICC also proposes to consistently refer to ‘‘stress MAD factors’’ as ‘‘stress implied MAD factors’’ in this section. Finally, the proposed rule change would amend the ‘‘Routinely Updated Parameters’’ subsection (Subsection 2.4) to be consistent with the changes to Section 1.7.1 noted above specifying that the index risk factor level risk management MADs are automatically updated daily in the risk management system and the other risk factor parameters are reviewed at least monthly. III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory 4 The description of the proposed rule change is excerpted from the Notice. VerDate Sep<11>2014 20:00 May 25, 2021 Jkt 253001 organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.5 For the reasons given below, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 6 and Rules 17Ad–22(e)(2)(i) and (v),7 Rule 17Ad–22(e)(4)(ii),8 and 17Ad– 22(e)(6)(i) 9 and thereunder. A. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency, like ICC, be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, as well as to assure the safeguarding of securities and funds which are in its custody or control or for which it is responsible.10 The Commission believes that the proposed changes to the RPSRP, as described above, would timely capture any significant MAD changes and minimize the cumulative effect of MAD changes between parameter updates for index risk factors, and thus reduce the level of initial margin procyclicality. This, in turn, helps to ensure that ICC collects initial margin sufficient to cover its credit exposures to its clearing participants, thereby supporting its ability to continue operating as a central counterparty with the financial resources necessary for ICC to promptly and accurately clear and settle CDS transactions and safeguard securities and funds. Further, the Commission believes that the changes to the Implied Distribution Parameters for Index Option Instruments in the RPSRP to replace references and notations to the scenarios associated with the LB default with the Extreme Price Change Scenarios strengthens the RPSRP documentation so that all sections are consistent with the previous change that incorporated Extreme Price Change Scenarios into the ICC risk management procedures, including the RPSRP.11 The Commission believes by ensuring generically named stress scenarios that relate to extreme market events, as opposed to the LB default, are incorporated into the RPSRP, ICC can be 5 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 7 17 CFR 240.17Ad–22(e)(2)(i) and (v). 8 17 CFR 240.17Ad–22(e)(4)(ii). 9 17 CFR 240.17Ad–22(e)(6)(i). 10 15 U.S.C. 78q–1(b)(3)(F). 11 See, SR–ICC–2020–009. 6 15 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 more flexible and capable of considering a range of events beyond the LB Default, which, in turn, enhances its ability to collect the appropriate amount of initial margin to cover its credit exposures to its clearing participants, thereby supporting its ability to continue operating as a central counterparty with the financial resources necessary to promptly and accurately clear and settle CDS transactions and safeguard securities and funds. Finally, the Commission believes that the proposed amendments to update the ‘‘Routinely Updated Parameters’’ subsection of the RPSRP to specify that the index risk factor level risk management MADs are automatically updated daily in the risk management system and the other risk factor parameters are reviewed at least monthly enhances clarity with respect to ICC’s process of setting and reviewing the model core parameters to ensure that the documentation remains up-todate and clear to support the effectiveness of ICC’s risk management system. The Commission believes that an effective risk management system supports ICC’s ability to maintain adequate financial resources, thereby promoting both the prompt and accurate clearance and settlement of CDS transactions and the ability to safeguard securities and funds. For these reasons, the Commission believes the proposed rule changes are consistent with Section 17A(b)(3)(F) of the Act.12 B. Consistency With Rule 17Ad– 22(e)(2)(i) and (v) Rule 17Ad–22(e)(2)(i) and (v) requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed, as applicable, to provide, as applicable, for governance arrangements that are clear and transparent and specify clear and direct lines of responsibility.13 The Commission believes that by proposing to amend the risk management MAD monthly parameter update for index risk factors to an automatic daily update in the risk management system, specifying that single name risk factor level risk management MADs are not subject to automatic updates and that the ICC Risk Department estimates and reviews the univariate single name integrated spread response parameters and their assumptions at least on a monthly basis, the proposed rule change promotes clear and transparent governance arrangements and direct lines of 12 15 13 17 E:\FR\FM\26MYN1.SGM U.S.C. 78q–1(b)(3)(F). CFR 240.17Ad–22(e)(2)(i) and (v). 26MYN1 Federal Register / Vol. 86, No. 100 / Wednesday, May 26, 2021 / Notices responsibility. For these reasons, the Commission believes that the proposed rule change is consistent with Rule 17Ad–22(e)(2)(i) and (v).14 C. Consistency With Rule 17Ad– 22(e)(4)(ii) Rule 17Ad–22(e)(4)(ii) requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed, as applicable, to effectively identify, measure, monitor, and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes, including by maintaining additional financial resources at the minimum to enable it to cover a wide range of foreseeable stress scenarios that include, but are not limited to, the default of the two participant families that would potentially cause the largest aggregate credit exposure for the covered clearing agency in extreme but plausible market conditions.15 The Commission believes that by transitioning the risk management MAD monthly parameter update for index risk factors to an automatic daily update, the proposed rule change would enhance ICC’s ability to manage risks and maintain sufficient financial resources by collecting the margin designed to cover its credit exposures, thereby strengthening its ability to maintain its financial resources and thus withstand the potential pressure of the default of a clearing participant. For these reasons, the Commission believes that the proposed rule change is consistent with Rule 17Ad– 22(e)(4)(ii). D. Consistency With Rule 17Ad– 22(e)(6)(i) Rule 17Ad–22(e)(6)(i) requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed, as applicable, to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, considers, and produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market.16 As noted above, the proposed rule change would revise the RPSRP such that the index risk factor level risk management MADs are automatically updated daily in the risk management system in order to timely capture any significant MAD changes and minimize the cumulative 14 17 CFR 240.17Ad–22(e)(2)(i) and (v). CFR 240.17Ad–22(e)(4)(ii). 16 17 CFR 240.17Ad–22(e)(6)(i). 15 17 VerDate Sep<11>2014 20:00 May 25, 2021 Jkt 253001 effect of MAD changes between two parameter updates and thus reduce the level of IM procyclicality. The Commission believes that because index RFs could exhibit dynamic market response to rapidly changing macroeconomic conditions, the proposed change should help to produce margin levels commensurate with the risks and particular attributes of portfolios in which positions in index RFs dominate portfolio compositions. The Commission also believes that the more frequent update should enhance and strengthen ICC’s process for reviewing and setting the model core parameters, which, in turn, serves to promote the soundness of ICC’s risk management model and system and thus to produce margin levels commensurate with the risks and particular attributes of each relevant product, portfolio, and market. For these reasons, the Commission believes that the proposed rule change is consistent with Rule 17Ad– 22(e)(6)(i).17 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act 18 and Rules 17Ad–22(e)(2)(i) and (v),19 Rule 17Ad–22(e)(4)(ii),20 and 17Ad– 22(e)(6)(i) 21 and thereunder. It is therefore ordered pursuant to Section 19(b)(2) of the Act 22 that the proposed rule change (SR–ICC–2021– 009), be, and hereby is, approved.23 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–11083 Filed 5–25–21; 8:45 am] BILLING CODE 8011–01–P 17 17 CFR 240.17Ad–22(e)(6)(i). U.S.C. 78q–1(b)(3)(F). 19 17 CFR 240.17Ad–22(e)(2)(i) and (v). 20 17 CFR 240.17Ad–22(e)(4)(ii). 21 17 CFR 240.17Ad–22(e)(6)(i). 22 15 U.S.C. 78s(b)(2). 23 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 24 17 CFR 200.30–3(a)(12). 18 15 PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 28427 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91862; File No. SR– NYSECHX–2021–10] Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Continue Offering Certain Connectivity Services That Have Been Suspended by the Securities and Exchange Commission May 12, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 7, 2021, NYSE Chicago, Inc. (‘‘NYSE Chicago’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to continue offering certain connectivity services that have been suspended by the Securities and Exchange Commission (‘‘Commission’’) at no charge, for a period of 14 days, in order to provide affected Users time to acquire substitute services before their connectivity is terminated. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\26MYN1.SGM 26MYN1

Agencies

[Federal Register Volume 86, Number 100 (Wednesday, May 26, 2021)]
[Notices]
[Pages 28425-28427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11083]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91951; File No. SR-ICC-2021-009]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Risk Parameter 
Setting and Review Policy

May 20, 2021.

I. Introduction

    On April 2, 2021, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (the Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to make changes to 
ICC's Risk Parameter Setting and Review Policy (``RPSRP''). The 
proposed rule change was published for comment in the Federal Register 
on April 14, 2021.\3\ The Commission did not receive comments regarding 
the proposed rule change. For the reasons discussed below, the 
Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ ICC Risk Parameter Setting and Review Policy, Exchange Act 
Release No. 91517 (April 8, 2021), 86 FR 19667 (April 14, 2021) (SR-
ICC-2021-009) (``Notice'').

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[[Page 28426]]

II. Description of the Proposed Rule Change

    ICC is proposing to revise its RPSRP, which describes the process 
of setting and reviewing the risk management model core parameters and 
the performance of sensitivity analyses related to certain parameter 
settings. Specifically, the proposed rule change would amend the 
``Univariate Level Parameters'' subsection (Subsection 1.7.1) related 
to the univariate level parameters associated with the integrated 
spread response model component.\4\ Namely, ICC proposes to transition 
the risk management mean absolute deviation (``MAD'') monthly parameter 
update for index risk factors to an automatic daily update in the risk 
management system. The proposed changes would also specify that single 
name risk factor level risk management MADs are not subject to 
automatic updates and that the ICC Risk Department estimates and 
reviews the univariate single name integrated spread response 
parameters and their assumptions at least on a monthly basis.
---------------------------------------------------------------------------

    \4\ The description of the proposed rule change is excerpted 
from the Notice.
---------------------------------------------------------------------------

    Further, the proposed rule change would make minor clarifications 
to the ``Implied Distribution Parameters for Index Option Instruments'' 
subsection (Subsection 1.7.4). Specifically, ICC previously replaced 
naming conventions used in the RPSRP for stress scenarios associated 
with the Lehman Brothers (``LB'') default with more generic naming 
conventions associated with extreme price changes, namely extreme price 
decreases and increases (the ``Extreme Price Change Scenarios''). The 
proposed rule change would make minor updates to replace references and 
notations to the scenarios associated with the LB default with the 
Extreme Price Change Scenarios. ICC also proposes to consistently refer 
to ``stress MAD factors'' as ``stress implied MAD factors'' in this 
section.
    Finally, the proposed rule change would amend the ``Routinely 
Updated Parameters'' subsection (Subsection 2.4) to be consistent with 
the changes to Section 1.7.1 noted above specifying that the index risk 
factor level risk management MADs are automatically updated daily in 
the risk management system and the other risk factor parameters are 
reviewed at least monthly.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\5\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \6\ and Rules 17Ad-22(e)(2)(i) and (v),\7\ Rule 17Ad-
22(e)(4)(ii),\8\ and 17Ad-22(e)(6)(i) \9\ and thereunder.
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    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \8\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \9\ 17 CFR 240.17Ad-22(e)(6)(i).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of a clearing agency, like ICC, be designed to promote the 
prompt and accurate clearance and settlement of securities transactions 
and, to the extent applicable, derivative agreements, contracts, and 
transactions, as well as to assure the safeguarding of securities and 
funds which are in its custody or control or for which it is 
responsible.\10\ The Commission believes that the proposed changes to 
the RPSRP, as described above, would timely capture any significant MAD 
changes and minimize the cumulative effect of MAD changes between 
parameter updates for index risk factors, and thus reduce the level of 
initial margin procyclicality. This, in turn, helps to ensure that ICC 
collects initial margin sufficient to cover its credit exposures to its 
clearing participants, thereby supporting its ability to continue 
operating as a central counterparty with the financial resources 
necessary for ICC to promptly and accurately clear and settle CDS 
transactions and safeguard securities and funds.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Further, the Commission believes that the changes to the Implied 
Distribution Parameters for Index Option Instruments in the RPSRP to 
replace references and notations to the scenarios associated with the 
LB default with the Extreme Price Change Scenarios strengthens the 
RPSRP documentation so that all sections are consistent with the 
previous change that incorporated Extreme Price Change Scenarios into 
the ICC risk management procedures, including the RPSRP.\11\ The 
Commission believes by ensuring generically named stress scenarios that 
relate to extreme market events, as opposed to the LB default, are 
incorporated into the RPSRP, ICC can be more flexible and capable of 
considering a range of events beyond the LB Default, which, in turn, 
enhances its ability to collect the appropriate amount of initial 
margin to cover its credit exposures to its clearing participants, 
thereby supporting its ability to continue operating as a central 
counterparty with the financial resources necessary to promptly and 
accurately clear and settle CDS transactions and safeguard securities 
and funds.
---------------------------------------------------------------------------

    \11\ See, SR-ICC-2020-009.
---------------------------------------------------------------------------

    Finally, the Commission believes that the proposed amendments to 
update the ``Routinely Updated Parameters'' subsection of the RPSRP to 
specify that the index risk factor level risk management MADs are 
automatically updated daily in the risk management system and the other 
risk factor parameters are reviewed at least monthly enhances clarity 
with respect to ICC's process of setting and reviewing the model core 
parameters to ensure that the documentation remains up-to-date and 
clear to support the effectiveness of ICC's risk management system. The 
Commission believes that an effective risk management system supports 
ICC's ability to maintain adequate financial resources, thereby 
promoting both the prompt and accurate clearance and settlement of CDS 
transactions and the ability to safeguard securities and funds.
    For these reasons, the Commission believes the proposed rule 
changes are consistent with Section 17A(b)(3)(F) of the Act.\12\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(2)(i) and (v)

    Rule 17Ad-22(e)(2)(i) and (v) requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed, as applicable, to provide, as 
applicable, for governance arrangements that are clear and transparent 
and specify clear and direct lines of responsibility.\13\ The 
Commission believes that by proposing to amend the risk management MAD 
monthly parameter update for index risk factors to an automatic daily 
update in the risk management system, specifying that single name risk 
factor level risk management MADs are not subject to automatic updates 
and that the ICC Risk Department estimates and reviews the univariate 
single name integrated spread response parameters and their assumptions 
at least on a monthly basis, the proposed rule change promotes clear 
and transparent governance arrangements and direct lines of

[[Page 28427]]

responsibility. For these reasons, the Commission believes that the 
proposed rule change is consistent with Rule 17Ad-22(e)(2)(i) and 
(v).\14\
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    \13\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \14\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
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C. Consistency With Rule 17Ad-22(e)(4)(ii)

    Rule 17Ad-22(e)(4)(ii) requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed, as applicable, to effectively identify, 
measure, monitor, and manage its credit exposures to participants and 
those arising from its payment, clearing, and settlement processes, 
including by maintaining additional financial resources at the minimum 
to enable it to cover a wide range of foreseeable stress scenarios that 
include, but are not limited to, the default of the two participant 
families that would potentially cause the largest aggregate credit 
exposure for the covered clearing agency in extreme but plausible 
market conditions.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.17Ad-22(e)(4)(ii).
---------------------------------------------------------------------------

    The Commission believes that by transitioning the risk management 
MAD monthly parameter update for index risk factors to an automatic 
daily update, the proposed rule change would enhance ICC's ability to 
manage risks and maintain sufficient financial resources by collecting 
the margin designed to cover its credit exposures, thereby 
strengthening its ability to maintain its financial resources and thus 
withstand the potential pressure of the default of a clearing 
participant.
    For these reasons, the Commission believes that the proposed rule 
change is consistent with Rule 17Ad-22(e)(4)(ii).

D. Consistency With Rule 17Ad-22(e)(6)(i)

    Rule 17Ad-22(e)(6)(i) requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed, as applicable, to cover its credit 
exposures to its participants by establishing a risk-based margin 
system that, at a minimum, considers, and produces margin levels 
commensurate with, the risks and particular attributes of each relevant 
product, portfolio, and market.\16\ As noted above, the proposed rule 
change would revise the RPSRP such that the index risk factor level 
risk management MADs are automatically updated daily in the risk 
management system in order to timely capture any significant MAD 
changes and minimize the cumulative effect of MAD changes between two 
parameter updates and thus reduce the level of IM procyclicality. The 
Commission believes that because index RFs could exhibit dynamic market 
response to rapidly changing macro-economic conditions, the proposed 
change should help to produce margin levels commensurate with the risks 
and particular attributes of portfolios in which positions in index RFs 
dominate portfolio compositions. The Commission also believes that the 
more frequent update should enhance and strengthen ICC's process for 
reviewing and setting the model core parameters, which, in turn, serves 
to promote the soundness of ICC's risk management model and system and 
thus to produce margin levels commensurate with the risks and 
particular attributes of each relevant product, portfolio, and market.
---------------------------------------------------------------------------

    \16\ 17 CFR 240.17Ad-22(e)(6)(i).
---------------------------------------------------------------------------

    For these reasons, the Commission believes that the proposed rule 
change is consistent with Rule 17Ad-22(e)(6)(i).\17\
---------------------------------------------------------------------------

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

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act, 
and in particular, with the requirements of Section 17A(b)(3)(F) of the 
Act \18\ and Rules 17Ad-22(e)(2)(i) and (v),\19\ Rule 17Ad-
22(e)(4)(ii),\20\ and 17Ad-22(e)(6)(i) \21\ and thereunder.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
    \19\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \20\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \21\ 17 CFR 240.17Ad-22(e)(6)(i).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\22\ that the proposed rule change (SR-ICC-2021-009), be, and hereby 
is, approved.\23\
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    \22\ 15 U.S.C. 78s(b)(2).
    \23\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11083 Filed 5-25-21; 8:45 am]
BILLING CODE 8011-01-P
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