Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Back-Testing Framework, 51204-51206 [2021-19725]

Download as PDF 51204 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices however, by not more than 60 days if the Commission determines that a longer period is appropriate and publishes the reasons for such determination. The proposed rule change was published for comment in the Federal Register on March 19, 2021.9 The 180th day after publication of the proposed rule change is September 15, 2021. The Commission is extending the time period for approving or disapproving the proposed rule change for an additional 60 days. The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comment letters that have been submitted in connection therewith. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,10 designates November 14, 2021, as the date by which the Commission shall either approve or disapprove the proposed rule change (File Number SR– CboeBZX–2021–019). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19726 Filed 9–13–21; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92893; File No. SR–ICC– 2021–018] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Back-Testing Framework tkelley on DSK125TN23PROD with NOTICES September 8, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 1 and Rule 19b–4,2 notice is hereby given that on August 24, 2021, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission the proposed rule change as described in Items I, II and III below, which Items have been prepared primarily by ICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 9 See supra note 3. U.S.C. 78s(b)(2). 11 17 CFR 200.30–3(a)(57). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 10 15 21:55 Sep 13, 2021 The principal purpose of the proposed rule change is to revise the ICE CDS Clearing: Back-Testing Framework (‘‘Back-Testing Framework’’) to include additional description on the lookback period for back-testing and other clarifications. These revisions do not require any changes to the ICC Clearing Rules (the ‘‘Rules’’). II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICC included statements concerning the purpose of and basis for the proposed rule change, security-based swap submission, or advance notice and discussed any comments it received on the proposed rule change, securitybased swap submission, or advance notice. The text of these statements may be examined at the places specified in Item IV below. ICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements. (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose BILLING CODE 8011–01–P VerDate Sep<11>2014 I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change Jkt 253001 ICC proposes revising the BackTesting Framework, which describes ICC’s back-testing approach and procedures and includes guidelines for remediating poor back-testing results. The proposed amendments include additional description on the lookback period for back-testing and other clarifications. ICC believes that such revisions will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. ICC proposes to make such changes effective following Commission approval of the proposed rule change. The proposed revisions are described in detail as follows. ICC proposes a clarification change in Subsection 1.2. The Back-Testing Framework discusses ICC’s back-testing analysis, which verifies that the number of actual losses is consistent with the number of projected losses. The proposed clarification to Subsection 1.2 specifies that the ICC Risk Department may consider back-testing analysis based on alternative statistical tests to assess the performance of its models in terms of statistical reliability. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 ICC proposes new Subsection 2.1 to include additional description on the lookback period for back-testing. Proposed Subsection 2.1 details the performance of back-testing analysis for Clearing Participant (‘‘CP’’) related portfolios. The proposed language discusses the maximum back-testing sample size, or the lookback period, and the benefit of allowing for a greater sample size in terms of assessing model performance. The proposed language also analyzes short lookback periods in combination with high risk quantile estimates. Moreover, ICC proposes to reference an alternative statistical test and describe how the model is considered to pass or fail the test. Proposed Figure 1 serves as an illustration under such alternative statistical test across different sample sizes and risk quantiles. Following such analysis, proposed Subsection 2.1 sets out ICC’s rationale for the minimum back-testing window length. Further, proposed Subsection 2.1 references the performance of additional analyses, as described in Section 4 of the BackTesting Framework, and includes language concerning the reporting of back-testing results. ICC proposes to renumber the following subsections accordingly. ICC proposes additional clarifications to the Back-Testing Framework. The proposed amendments include a footnote in amended Subsection 2.6 that references a relevant Commodity Futures Trading Commission regulation with respect to ICC’s performance of back-testing analysis. ICC further proposes amendments to Section 4, which contains guidelines for remediating poor back-testing results. Currently, poor back-testing results require a peer review of the risk models by the Risk Working Group (‘‘RWG’’), which is comprised of risk representatives from ICC’s CPs, and remedial actions to improve model performance. The proposed changes describe an additional aspect presented to the RWG and note an assessment that corresponds to the performance of a back-testing analysis without overlapping periods. ICC also proposes to update Section 5, containing a list of references, to include a reference for the alternative statistical test described in proposed Subsection 2.1. (b) Statutory Basis ICC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 3 and the regulations thereunder applicable to it, including the applicable 3 15 E:\FR\FM\14SEN1.SGM U.S.C. 78q–1. 14SEN1 tkelley on DSK125TN23PROD with NOTICES Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices standards under Rule 17Ad–22.4 In particular, Section 17A(b)(3)(F) of the Act 5 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. The proposed amendments include additional description on the lookback period for back-testing and other clarifications. Proposed Subsection 2.1 sets out ICC’s rationale for the minimum back-testing window length. The new subsection is intended to provide additional description and analysis on the lookback period for back-testing and would not change the methodology. The additional revisions further ensure clarity and transparency with respect to ICC’s back-testing approach, procedures, and guidelines for remediating poor back-testing results. The proposed footnote references a relevant regulation to ensure ICC’s performance of backtesting analysis is in compliance with applicable requirements. As such, ICC believes that the proposed rule change would help assure the soundness of the model by ensuring that back-testing analysis is conducted properly to assess the performance of the model. The proposed rule change is therefore consistent with the prompt and accurate clearing and settlement of the contracts 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, within the meaning of Section 17A(b)(3)(F) of the Act.6 Rule 17Ad–22(e)(2)(i) and (v) 7 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide for governance arrangements that are clear and transparent and specify clear and direct lines of responsibility. ICC’s Back-Testing Framework clearly assigns and documents responsibility and accountability for performing backtesting analyses and remediating poor back-testing results. Amended Subsection 4 describes an additional aspect presented to the RWG and notes an assessment that corresponds to the performance of a back-testing analysis without overlapping periods. ICC 4 17 5 15 CFR 240.17Ad–22. U.S.C. 78q–1(b)(3)(F). 8 Id. 9 17 6 Id. 7 17 believes that specifying these additional responsibilities would strengthen the governance arrangements in the BackTesting Framework and the BackTesting Framework would continue to ensure that ICC maintains clear and transparent governance procedures and arrangements with respect to the performance, review, and reporting of back-testing results and the remediation of poor back-testing results. As such, in ICC’s view, the proposed rule change continues to ensure that ICC maintains policies and procedures that are reasonably designed to provide for clear and transparent governance arrangements and specify clear and direct lines of responsibility, consistent with Rule 17Ad–22(e)(2)(i) and (v).8 Rule 17Ad–22(e)(4)(ii) 9 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures reasonably designed 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. As discussed above, proposed Subsection 2.1 would provide additional description and analysis on the lookback period for back-testing and would not change the methodology. The additional revisions enhance the clarity and transparency of the Back-Testing Framework, which would strengthen the documentation and ensure that it remains up-to-date, clear, and transparent. ICC believes that the proposed changes would enhance ICC’s ability to manage risks and maintain appropriate financial resources, including by ensuring that back-testing analysis is conducted properly to assess the performance of the model. As such, the proposed amendments would strengthen ICC’s ability to maintain its financial resources and withstand the pressures of defaults, consistent with the requirements of Rule 17Ad– 22(e)(4)(ii).10 Rule 17Ad–22(e)(6)(vi) 11 requires each covered clearing agency to establish, implement, maintain, and enforce written policies and procedures CFR 240.17Ad–22(e)(4)(ii). reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, is monitored by management on an ongoing basis and is regularly reviewed, tested, and verified by (A) conducting back-tests of its margin model at least once each day using standard predetermined parameters and assumptions; and (B) conducting a sensitivity analysis of its margin model and a review of its parameters and assumptions for backtesting on at least a monthly basis, and considering modifications to ensure the back-testing practices are appropriate for determining the adequacy of ICC’s margin resources. The Back-Testing Framework continues to require the performance of daily, weekly, monthly, and quarterly portfolio-level backtesting analyses, the performance of monthly parameter reviews and parameter sensitivity analyses, and the remediation of poor-back-testing results. The proposed amendments consist of additional description on the lookback period for back-testing and other clarifications regarding back-testing analysis and the remediation of poor back-testing results. These procedures in the Back-Testing Framework continue to promote the soundness of ICC’s model and ensure that ICC’s risk management system is effective and appropriate in addressing the risks associated with discharging its responsibilities. The proposed changes are thus consistent with the requirements of Rule 17Ad– 22(e)(6)(vi).12 (B) Clearing Agency’s Statement on Burden on Competition ICC does not believe the proposed rule change would have any impact, or impose any burden, on competition. The proposed changes to ICC’s BackTesting Framework will apply uniformly across all market participants. Therefore, ICC does not believe the proposed rule change imposes any burden on competition that is inappropriate in furtherance of the purposes of the Act. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule change have not been solicited or received. ICC will notify the Commission of any written comments received by ICC. 10 Id. CFR 240.17Ad–22(e)(2)(i) and (v). VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 11 17 PO 00000 CFR 240.17Ad–22(e)(6)(vi). Frm 00108 Fmt 4703 Sfmt 4703 51205 12 Id. E:\FR\FM\14SEN1.SGM 14SEN1 51206 Federal Register / Vol. 86, No. 175 / Tuesday, September 14, 2021 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments: • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ICC–2021–018 on the subject line. tkelley on DSK125TN23PROD with NOTICES 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–2021–018. 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 VerDate Sep<11>2014 21:55 Sep 13, 2021 Jkt 253001 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–2021–018 and should be submitted on or before October 5, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–19725 Filed 9–13–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92895; File No. SR–ICC– 2021–016] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICC Exercise Procedures September 8, 2021. I. Introduction On July 8, 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–4,2 a proposed rule change to revise the Exercise Procedures in connection with the clearing of credit default index swaptions (‘‘Index Swaptions’’). The proposed rule change was published for comment in the Federal Register on July 28, 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. II. Description of the Proposed Rule Change The Exercise Procedures supplement the provisions of Subchapter 26R of the ICC Clearing Rules (the ‘‘Rules’’) with respect to Index Swaptions and provide 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC Exercise Procedures; Exchange Act Release No. 92468 (July 28, 2021); 86 FR 40665 (July 28, 2021) (SR–ICC–2021–016) (‘‘Notice’’). 1 15 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 further detail as to the manner in which Index Swaptions may be exercised by Swaption Buyers, the manner in which ICC will assign such exercises to Swaption Sellers, and certain actions that ICC may take in the event of technical issues.4 The proposed rule change would amend two sections of the Exercise Procedures: Paragraph 2.6 Exercise System Failure and Paragraph 2.8 Automatic Exercise for Exercise System Failure.5 A. Paragraph 2.6 Exercise System Failure Currently, in the event that ICC’s electronic system for the submission and assignment of Swaption Exercise Notices (ICC’s ‘‘Exercise System’’) fails to be in operation under certain circumstances, the Exercise Procedures provide ICC with the following options: (i) Cancel and reschedule the Exercise Period (i.e., the period on the expiration date of an Index Swaption during which the Swaption Buyer may deliver an exercise notice to ICC to exercise all or part of such Index Swaption); (ii) determine that automatic exercise will apply; and/or (iii) take such other action as ICC determines to be appropriate to permit exercising parties to submit exercise notices and to permit ICC to assign such notices. The proposed rule change would remove ICC’s ability to cancel and reschedule the Exercise Period under such circumstances and renumber the paragraph. This would facilitate exercise when there is a system’s failure and avoid uncertainty that could arise if an Exercise Period is rescheduled. B. Paragraph 2.8 Automatic Exercise for Exercise System Failure Currently, if automatic exercise applies pursuant to Paragraph 2.6, Paragraph 2.8 specifies the parameters under which such automatic exercise will apply. Under Paragraph 2.8, ICC maintains the ability to effect an automatic exercise on the expiration date on each open position (of all exercising parties) in an Index Swaption that is determined by ICC to be ‘‘in the money’’ on such date. Currently, whether an Index Swaption is ‘‘in the money’’ is based on the average of the end-of-day (‘‘EOD’’) price of the underlying CDS contract on the preceding business day and on the expiration date, and where relevant, also based on the average of the EOD price on the preceding business day and 4 Capitalized terms not otherwise defined herein have the meanings assigned to them in the ICC Rules, as applicable. 5 The description of the proposed rule change is excerpted substantially from the Notice. E:\FR\FM\14SEN1.SGM 14SEN1

Agencies

[Federal Register Volume 86, Number 175 (Tuesday, September 14, 2021)]
[Notices]
[Pages 51204-51206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19725]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92893; File No. SR-ICC-2021-018]


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

September 8, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ and Rule 19b-4,\2\ notice is hereby given that on August 24, 2021, 
ICE Clear Credit LLC (``ICC'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I, II and III 
below, which Items have been prepared primarily by ICC. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the 
ICE CDS Clearing: Back-Testing Framework (``Back-Testing Framework'') 
to include additional description on the lookback period for back-
testing and other clarifications. These revisions do not require any 
changes to the ICC Clearing Rules (the ``Rules'').

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

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

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

(a) Purpose
    ICC proposes revising the Back-Testing Framework, which describes 
ICC's back-testing approach and procedures and includes guidelines for 
remediating poor back-testing results. The proposed amendments include 
additional description on the lookback period for back-testing and 
other clarifications. ICC believes that such revisions will facilitate 
the prompt and accurate clearance and settlement of securities 
transactions and derivative agreements, contracts, and transactions for 
which it is responsible. ICC proposes to make such changes effective 
following Commission approval of the proposed rule change. The proposed 
revisions are described in detail as follows.
    ICC proposes a clarification change in Subsection 1.2. The Back-
Testing Framework discusses ICC's back-testing analysis, which verifies 
that the number of actual losses is consistent with the number of 
projected losses. The proposed clarification to Subsection 1.2 
specifies that the ICC Risk Department may consider back-testing 
analysis based on alternative statistical tests to assess the 
performance of its models in terms of statistical reliability.
    ICC proposes new Subsection 2.1 to include additional description 
on the lookback period for back-testing. Proposed Subsection 2.1 
details the performance of back-testing analysis for Clearing 
Participant (``CP'') related portfolios. The proposed language 
discusses the maximum back-testing sample size, or the lookback period, 
and the benefit of allowing for a greater sample size in terms of 
assessing model performance. The proposed language also analyzes short 
lookback periods in combination with high risk quantile estimates. 
Moreover, ICC proposes to reference an alternative statistical test and 
describe how the model is considered to pass or fail the test. Proposed 
Figure 1 serves as an illustration under such alternative statistical 
test across different sample sizes and risk quantiles. Following such 
analysis, proposed Subsection 2.1 sets out ICC's rationale for the 
minimum back-testing window length. Further, proposed Subsection 2.1 
references the performance of additional analyses, as described in 
Section 4 of the Back-Testing Framework, and includes language 
concerning the reporting of back-testing results. ICC proposes to 
renumber the following subsections accordingly.
    ICC proposes additional clarifications to the Back-Testing 
Framework. The proposed amendments include a footnote in amended 
Subsection 2.6 that references a relevant Commodity Futures Trading 
Commission regulation with respect to ICC's performance of back-testing 
analysis. ICC further proposes amendments to Section 4, which contains 
guidelines for remediating poor back-testing results. Currently, poor 
back-testing results require a peer review of the risk models by the 
Risk Working Group (``RWG''), which is comprised of risk 
representatives from ICC's CPs, and remedial actions to improve model 
performance. The proposed changes describe an additional aspect 
presented to the RWG and note an assessment that corresponds to the 
performance of a back-testing analysis without overlapping periods. ICC 
also proposes to update Section 5, containing a list of references, to 
include a reference for the alternative statistical test described in 
proposed Subsection 2.1.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \3\ and the regulations 
thereunder applicable to it, including the applicable

[[Page 51205]]

standards under Rule 17Ad-22.\4\ In particular, Section 17A(b)(3)(F) of 
the Act \5\ 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. The proposed amendments include additional description 
on the lookback period for back-testing and other clarifications. 
Proposed Subsection 2.1 sets out ICC's rationale for the minimum back-
testing window length. The new subsection is intended to provide 
additional description and analysis on the lookback period for back-
testing and would not change the methodology. The additional revisions 
further ensure clarity and transparency with respect to ICC's back-
testing approach, procedures, and guidelines for remediating poor back-
testing results. The proposed footnote references a relevant regulation 
to ensure ICC's performance of back-testing analysis is in compliance 
with applicable requirements. As such, ICC believes that the proposed 
rule change would help assure the soundness of the model by ensuring 
that back-testing analysis is conducted properly to assess the 
performance of the model. The proposed rule change is therefore 
consistent with the prompt and accurate clearing and settlement of the 
contracts 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, within the meaning of 
Section 17A(b)(3)(F) of the Act.\6\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78q-1.
    \4\ 17 CFR 240.17Ad-22.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(2)(i) and (v) \7\ requires each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. ICC's Back-Testing Framework clearly 
assigns and documents responsibility and accountability for performing 
back-testing analyses and remediating poor back-testing results. 
Amended Subsection 4 describes an additional aspect presented to the 
RWG and notes an assessment that corresponds to the performance of a 
back-testing analysis without overlapping periods. ICC believes that 
specifying these additional responsibilities would strengthen the 
governance arrangements in the Back-Testing Framework and the Back-
Testing Framework would continue to ensure that ICC maintains clear and 
transparent governance procedures and arrangements with respect to the 
performance, review, and reporting of back-testing results and the 
remediation of poor back-testing results. As such, in ICC's view, the 
proposed rule change continues to ensure that ICC maintains policies 
and procedures that are reasonably designed to provide for clear and 
transparent governance arrangements and specify clear and direct lines 
of responsibility, consistent with Rule 17Ad-22(e)(2)(i) and (v).\8\
---------------------------------------------------------------------------

    \7\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \8\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(4)(ii) \9\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed 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. 
As discussed above, proposed Subsection 2.1 would provide additional 
description and analysis on the lookback period for back-testing and 
would not change the methodology. The additional revisions enhance the 
clarity and transparency of the Back-Testing Framework, which would 
strengthen the documentation and ensure that it remains up-to-date, 
clear, and transparent. ICC believes that the proposed changes would 
enhance ICC's ability to manage risks and maintain appropriate 
financial resources, including by ensuring that back-testing analysis 
is conducted properly to assess the performance of the model. As such, 
the proposed amendments would strengthen ICC's ability to maintain its 
financial resources and withstand the pressures of defaults, consistent 
with the requirements of Rule 17Ad-22(e)(4)(ii).\10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \10\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(vi) \11\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, is monitored by management on an ongoing basis and is 
regularly reviewed, tested, and verified by (A) conducting back-tests 
of its margin model at least once each day using standard predetermined 
parameters and assumptions; and (B) conducting a sensitivity analysis 
of its margin model and a review of its parameters and assumptions for 
back-testing on at least a monthly basis, and considering modifications 
to ensure the back-testing practices are appropriate for determining 
the adequacy of ICC's margin resources. The Back-Testing Framework 
continues to require the performance of daily, weekly, monthly, and 
quarterly portfolio-level back-testing analyses, the performance of 
monthly parameter reviews and parameter sensitivity analyses, and the 
remediation of poor-back-testing results. The proposed amendments 
consist of additional description on the lookback period for back-
testing and other clarifications regarding back-testing analysis and 
the remediation of poor back-testing results. These procedures in the 
Back-Testing Framework continue to promote the soundness of ICC's model 
and ensure that ICC's risk management system is effective and 
appropriate in addressing the risks associated with discharging its 
responsibilities. The proposed changes are thus consistent with the 
requirements of Rule 17Ad-22(e)(6)(vi).\12\
---------------------------------------------------------------------------

    \11\ 17 CFR 240.17Ad-22(e)(6)(vi).
    \12\ Id.
---------------------------------------------------------------------------

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

    ICC does not believe the proposed rule change would have any 
impact, or impose any burden, on competition. The proposed changes to 
ICC's Back-Testing Framework will apply uniformly across all market 
participants. Therefore, ICC does not believe the proposed rule change 
imposes any burden on competition that is inappropriate in furtherance 
of the purposes of the Act.

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

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

[[Page 51206]]

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-2021-018 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-2021-018. 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-2021-018 and should be 
submitted on or before October 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19725 Filed 9-13-21; 8:45 am]
BILLING CODE 8011-01-P
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