Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change Relating to Amendments to the Model Risk Policy, 56901-56903 [2023-17860]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 160 / Monday, August 21, 2023 / Notices
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
a.m. and 3 p.m. Copies of such filings
also will 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.
Do not include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–ICC–2023–012 and
should be submitted on or before
September 11, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17857 Filed 8–18–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98138; File No. SR–ICEEU–
2023–019]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Proposed Rule Change Relating to
Amendments to the Model Risk Policy
ddrumheller on DSK120RN23PROD with NOTICES1
August 15, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 4,
2023, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’ or the ‘‘Clearing House’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule changes described in
Items I, II and III below, which Items
have been prepared primarily by ICE
Clear Europe. The Commission is
publishing this notice to solicit
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18:17 Aug 18, 2023
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
ICE Clear Europe Limited (‘‘ICE Clear
Europe’’ or the ‘‘Clearing House’’)
proposes to modify its Model Risk
Governance Framework (to be renamed
the Model Risk Policy) (the ‘‘Model Risk
Policy’’ or the ‘‘Policy’’) 3 to make
certain enhancements to the Clearing
House’s current policy and practices as
they pertain to model and parameter
risks.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICE
Clear Europe 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. ICE
Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C)
below, of the most significant aspects of
such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
ICE Clear Europe is proposing to
amend its Model Risk Governance
Framework (to be renamed the Model
Risk Policy) to expand its current scope
to include certain risk frameworks and
to distinguish between ‘‘Business As
Usual’’ (‘‘BAU’’) and non-BAU
parameter changes, among other
changes discussed herein.
The amendments would expand the
scope of the Policy to include risk
frameworks used to quantify, aggregate
and manage the risks of the Clearing
House. The amendments would further
clarify that references to ‘‘model’’ in the
rest of the document would refer to both
models and risk frameworks. The
discussion of the architecture
supporting the Policy would be revised
to also include guidelines for the
remediation of validation findings
relating to models.
The amendments would also state
that changes to risk parameters would
be categorized as significant and not
significant. This would follow the same
categorization under the existing Policy
with respect to model changes. A
3 Capitalized terms used but not defined herein
have the meanings specified in the ICE Clear
Europe Clearing Rules and the Policy.
1 15
VerDate Sep<11>2014
comments on the proposed rule change
from interested persons.
Jkt 259001
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
56901
footnote referencing a specific ESMA
opinion as providing the criteria
defining model change significance
would be revised to state more generally
that the criteria will be in accordance
with prevailing regulatory opinions,
guidelines or requirements (in order to
take into account any other regulatory
positions that may be in effect from time
to time). Moreover, the changes to
parameters would be categorized as
Business as Usual (‘‘BAU’’) and NonBAU. Changes considered BAU would
be defined as changes in the parameters
resulting from the application of
existing methodologies as part of a
regular review or calibration exercise.
Non-BAU changes would be all other
changes. The amendments would clarify
that the definition of BAU would be in
accordance with existing regulatory
guidelines.
The amendments would also clarify
certain governance responsibilities. The
Board would be responsible for the
approval of significant non-BAU
changes to risk parameters. Auto Pilot
versus Production deviations beyond
BAU thresholds will generally follow a
similar governance process to that for
changes in parameters but given that
these deviations are usually time
sensitive and driven by stressed market
conditions, the Clearing House will
need the ability to act quickly to ensure
market stability. Thus, for these
situations the governance process will
involve Board notification rather than
Board pre-approval and Risk Oversight
Department review rather than full
independent pre-validation. The Model
Oversight Committee would be
responsible for establishing and
maintaining a model inventory and
assigning a specific owner to each
model (a function currently performed
by the First Line). The Model Oversight
Committee would also be responsible
for approving non-significant non-BAU
changes to risk parameters and for
reviewing significant non-BAU changes
to risk parameters for recommendation
to the Board. In addition, the committee
would be responsible for approving
changes to model documentation.
The First Line responsibilities would
also be modified by the amendments. As
noted above, the First Line would no
longer be responsible for establishing
and maintaining a model inventory and
assigning a specific owner to each
model as that responsibility would be
moved to the Model Oversight
Committee. The First Line would be
responsible for proposing and seeking
approval for non-BAU changes to risk
parameters (as it currently does for
models, model changes, and model
retirements). Similarly, the First Line
E:\FR\FM\21AUN1.SGM
21AUN1
56902
Federal Register / Vol. 88, No. 160 / Monday, August 21, 2023 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
would also be responsible for proposing
significance levels for non-BAU changes
to risk parameters. The Second Line
would be responsible for performing
independent validation exercises for
non-BAU changes to risk parameters (as
it currently does for models).
Finally, a new sub-section would be
added addressing Non-BAU parameter
changes. The section would provide that
significant non-BAU changes to risk
parameters must be validated before
they are implemented in production.
Non-significant non-BAU changes must
be validated in accordance with the
validation pipeline.
A number of other drafting
clarifications and conforming changes
replacing the references to
‘‘Framework’’ with ‘‘Policy’’ would also
be made throughout the document.
(b) Statutory Basis
ICE Clear Europe believes that the
proposed amendments to the Policy are
consistent with the requirements of
Section 17A of the Securities Exchange
Act of 1934 (the ‘‘Act’’) 4 and the
regulations thereunder applicable to it.
In particular, Section 17A(b)(3)(F) of the
Act 5 requires, among other things, that
the rules of a clearing agency be
designed to promote the prompt and
accurate clearance and settlement of
securities transactions and, to the extent
applicable, derivative agreements,
contracts, and transactions, the
safeguarding of securities and funds in
the custody or control of the clearing
agency or for which it is responsible,
and the protection of investors and the
public interest.
The proposed changes to the Policy
are designed to facilitate the risk
management and governance of risk
frameworks in a similar manner to that
for models under the existing
framework. The processes, controls and
escalations used by the Clearing House
with respect to the testing and
reviewing of models, as well the
responsibilities of the Clearing House’s
committees, management and the Board
in relation to the models would thus be
applied to risk frameworks. The
amendments provide additional
procedures for the management of risk
parameter changes, distinguishing
between BAU and non-BAU (which are
subject to additional review and
governance requirements). The Clearing
House believes these changes will
further overall risk management at the
Clearing House, which would in turn
promote the stability of the Clearing
House and the prompt and accurate
4 15
5 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
VerDate Sep<11>2014
18:17 Aug 18, 2023
Jkt 259001
clearance and settlement of cleared
contracts. The enhanced Policy is
therefore also generally consistent with
the protection of investors and the
public interest in the safe operation of
the Clearing House. (ICE Clear Europe
would not expect the amendments to
affect the safeguarding of securities and
funds in ICE Clear Europe’s custody or
control or for which it is responsible.)
Accordingly, the amendments satisfy
the requirements of Section
17A(b)(3)(F).6
The amendments to the Policy are
also consistent with relevant provisions
of Rule 17Ad–22.7 Rule 17Ad–22(e)(3)(i)
provides that ‘‘[e]ach covered clearing
agency shall establish, implement,
maintain and enforce written policies
and procedures reasonable designed to,
as applicable [. . .] identify, measure,
monitor, and manage the range of risks
that arise in or are borne by the covered
clearing agency’’.8 The amendments to
the Policy are intended to expand the
considerations of the existing model
governance framework to apply to risk
frameworks as well as models and to
distinguish BAU and non-BAU changes
to risk parameters for purposes of
ongoing review and oversight. The
expanded scope of the Policy will, in
ICE Clear Europe’s view, assist the
Clearing House in the ongoing review
and oversight of the models and
frameworks it uses in the operation of
the Clearing House, and the
management of the risks that may arise
from the use of such models and
frameworks. The amendments would
thus strengthen the overall risk
management of the Clearing House. In
ICE Clear Europe’s view, the
amendments are therefore consistent
with the requirements of Rule 17Ad–
22(e)(3)(i).9
Rule 17Ad–22(b)(4) provides ‘‘[a]
registered clearing agency that performs
central counterparty services shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to [. . .] [p]rovide
for an annual model validation
consisting of evaluating the performance
of the clearing agency’s margin models
and the related parameters and
assumptions associated with such
models by a qualified person who is free
from influence from the persons
responsible for the development or
operation of the models being
validated’’.10 The amendments add nonBAU changes to risk parameters but do
U.S.C. 78q–1(b)(3)(F).
CFR 240.17 Ad–22.
8 17 CFR 240.17 Ad–22(e)(3)(i).
9 17 CFR 240.17 Ad–22(e)(3)(i).
10 17 CFR 240.17Ad–22(b)(4).
not otherwise change the Policy’s or
Clearing House’s practice in reviewing
and validating models. Under the
Policy, the First Line would still be
responsible for development and
operation of the models, while the Risk
Oversight Department (as part of the
Second Line) is responsible for
performing independent validation
exercises for the new models, model
changes and non-BAU changes to risk
parameters. The Risk Oversight
Committee would also oversee
independent validation exercises
performed by external validators. In ICE
Clear Europe’s view, the amendments
are therefore consistent with Rule
17Ad–22(b)(4).11
Rules 17Ad–22(e)(4)(vii) provides
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to, as applicable
[. . .] [e]ffectively identify, measure,
monitor, and manage its credit
exposures to participants and those
arising from its payment, clearing, and
settlement processes, including by
[. . .] [p]erforming a model validation
for its credit risk models not less than
annually or more frequently as may be
contemplated by the covered clearing
agency’s risk management framework
established [. . .]’’ 12 and 17Ad–
22(e)(6)(vii) provides ‘‘[e]ach covered
clearing agency shall establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to, as applicable
[. . .] [c]over, if the covered clearing
agency provides central counterparty
services, its credit exposures to its
participants by establishing a risk-based
margin system that, at a minimum [. . .]
[r]equires a model validation for the
covered clearing agency’s margin system
and related models to be performed not
less than annually, or more frequently
as may be contemplated by the covered
clearing agency’s risk management
framework [. . .]’’.13 The amendments
to the Policy expand the current scope
to include risk frameworks and do not
otherwise change ICE Clear Europe’s
model validation cycles. As per the
Policy and the Clearing House’s current
practice, the validation pipeline would
still include annual validation cycles. In
ICE Clear Europe’s view, the
amendments are therefore consistent
with Rules 17Ad–22(e)(4)(vii) 14 and
17Ad–22(e)(6)(vii).15
6 15
11 17
7 17
12 17
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
CFR 240.17Ad–22(b)(4).
CFR 240.17Ad–22(e)(4)(vii).
13 17 CFR 240.17Ad–22(e)(6)(vii).
14 17 CFR 240.17Ad–22(e)(4)(vii).
15 17 CFR 240.17Ad–22(e)(6)(vii).
E:\FR\FM\21AUN1.SGM
21AUN1
Federal Register / Vol. 88, No. 160 / Monday, August 21, 2023 / Notices
Rule 17Ad–22(e)(2) provides that
‘‘[e]ach covered clearing agency shall
establish, implement, maintain and
enforce written policies and procedures
reasonable designed to, as applicable
[. . .] provide for governance
arrangements that are clear and
transparent’’ 16 and ‘‘[s]pecify clear and
direct lines of responsibility’’.17 The
amendments to the Policy would extend
the existing responsibilities of the
Clearing House’s committees,
management and the Board with respect
to models to also apply to risk
frameworks. The amendments would
also clarify certain responsibilities of
the Board and other relevant committees
and personnel as they relate to BAU and
Non-BAU changes to risk parameters. In
ICE Clear Europe’s view, the
amendments are therefore consistent
with the requirements of Rule 17Ad–
22(e)(2).18
(B) Clearing Agency’s Statement on
Burden on Competition
ICE Clear Europe does not believe the
proposed amendments would have any
impact, or impose any burden, on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. The amendments
are being adopted to update and expand
the Clearing House’s Model Risk Policy,
which relate to the Clearing House’s
internal processes for model and risk
framework review, and overall risk
management. The amendments will not
change the Clearing House Rules or
Procedures and will not change the
rights or obligations of the Clearing
House or Clearing Members. ICE Clear
Europe does not believe the
amendments and adoption would affect
the costs of clearing, the ability of
market participants to access clearing,
or the market for clearing services
generally. Therefore, ICE Clear Europe
does not believe the proposed rule
change imposes any burden on
competition that is inappropriate in
furtherance of the purposes of the Act.
ddrumheller on DSK120RN23PROD with NOTICES1
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments relating to the
proposed amendments have not been
solicited or received by ICE Clear
Europe. ICE Clear Europe will notify the
Commission of any written comments
received with respect to the proposed
rule change.
16 17
CFR 240.17 Ad–22(e)(2)(i).
CFR 240.17 Ad–22(e)(2)(v).
18 17 CFR 240.17 Ad–22(e)(2).
17 17
VerDate Sep<11>2014
18:17 Aug 18, 2023
Jkt 259001
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–
ICEEU–2023–019 on the subject line.
Paper Comments
• 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–ICEEU–2023–019. 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
a.m. and 3 p.m. Copies of such filings
will also be available for inspection and
PO 00000
Frm 00112
Fmt 4703
Sfmt 4703
56903
copying at the principal office of ICE
Clear Europe and on ICE Clear Europe’s
website at https://www.ice.com/cleareurope/regulation.
Do not include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–ICEEU–2023–019
and should be submitted on or before
September 11, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17860 Filed 8–18–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98136; File No. SR–
NYSEARCA–2023–52]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Fees and Charges
August 15, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 1,
2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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.
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\21AUN1.SGM
21AUN1
]]>Agencies
[Federal Register Volume 88, Number 160 (Monday, August 21, 2023)]
[Notices]
[Pages 56901-56903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17860]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98138; File No. SR-ICEEU-2023-019]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to Amendments to the Model
Risk Policy
August 15, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 4, 2023, ICE Clear Europe Limited (``ICE Clear Europe'' or
the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule changes described in
Items I, II and III below, which Items have been prepared primarily by
ICE Clear Europe. 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
ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing
House'') proposes to modify its Model Risk Governance Framework (to be
renamed the Model Risk Policy) (the ``Model Risk Policy'' or the
``Policy'') \3\ to make certain enhancements to the Clearing House's
current policy and practices as they pertain to model and parameter
risks.
---------------------------------------------------------------------------
\3\ Capitalized terms used but not defined herein have the
meanings specified in the ICE Clear Europe Clearing Rules and the
Policy.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICE Clear Europe 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. ICE Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICE Clear Europe is proposing to amend its Model Risk Governance
Framework (to be renamed the Model Risk Policy) to expand its current
scope to include certain risk frameworks and to distinguish between
``Business As Usual'' (``BAU'') and non-BAU parameter changes, among
other changes discussed herein.
The amendments would expand the scope of the Policy to include risk
frameworks used to quantify, aggregate and manage the risks of the
Clearing House. The amendments would further clarify that references to
``model'' in the rest of the document would refer to both models and
risk frameworks. The discussion of the architecture supporting the
Policy would be revised to also include guidelines for the remediation
of validation findings relating to models.
The amendments would also state that changes to risk parameters
would be categorized as significant and not significant. This would
follow the same categorization under the existing Policy with respect
to model changes. A footnote referencing a specific ESMA opinion as
providing the criteria defining model change significance would be
revised to state more generally that the criteria will be in accordance
with prevailing regulatory opinions, guidelines or requirements (in
order to take into account any other regulatory positions that may be
in effect from time to time). Moreover, the changes to parameters would
be categorized as Business as Usual (``BAU'') and Non-BAU. Changes
considered BAU would be defined as changes in the parameters resulting
from the application of existing methodologies as part of a regular
review or calibration exercise. Non-BAU changes would be all other
changes. The amendments would clarify that the definition of BAU would
be in accordance with existing regulatory guidelines.
The amendments would also clarify certain governance
responsibilities. The Board would be responsible for the approval of
significant non-BAU changes to risk parameters. Auto Pilot versus
Production deviations beyond BAU thresholds will generally follow a
similar governance process to that for changes in parameters but given
that these deviations are usually time sensitive and driven by stressed
market conditions, the Clearing House will need the ability to act
quickly to ensure market stability. Thus, for these situations the
governance process will involve Board notification rather than Board
pre-approval and Risk Oversight Department review rather than full
independent pre-validation. The Model Oversight Committee would be
responsible for establishing and maintaining a model inventory and
assigning a specific owner to each model (a function currently
performed by the First Line). The Model Oversight Committee would also
be responsible for approving non-significant non-BAU changes to risk
parameters and for reviewing significant non-BAU changes to risk
parameters for recommendation to the Board. In addition, the committee
would be responsible for approving changes to model documentation.
The First Line responsibilities would also be modified by the
amendments. As noted above, the First Line would no longer be
responsible for establishing and maintaining a model inventory and
assigning a specific owner to each model as that responsibility would
be moved to the Model Oversight Committee. The First Line would be
responsible for proposing and seeking approval for non-BAU changes to
risk parameters (as it currently does for models, model changes, and
model retirements). Similarly, the First Line
[[Page 56902]]
would also be responsible for proposing significance levels for non-BAU
changes to risk parameters. The Second Line would be responsible for
performing independent validation exercises for non-BAU changes to risk
parameters (as it currently does for models).
Finally, a new sub-section would be added addressing Non-BAU
parameter changes. The section would provide that significant non-BAU
changes to risk parameters must be validated before they are
implemented in production. Non-significant non-BAU changes must be
validated in accordance with the validation pipeline.
A number of other drafting clarifications and conforming changes
replacing the references to ``Framework'' with ``Policy'' would also be
made throughout the document.
(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Policy are consistent with the requirements of Section 17A of the
Securities Exchange Act of 1934 (the ``Act'') \4\ and the regulations
thereunder applicable to it. In particular, Section 17A(b)(3)(F) of the
Act \5\ requires, among other things, that the rules of a clearing
agency be designed to promote the prompt and accurate clearance and
settlement of securities transactions and, to the extent applicable,
derivative agreements, contracts, and transactions, the safeguarding of
securities and funds in the custody or control of the clearing agency
or for which it is responsible, and the protection of investors and the
public interest.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1.
\5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed changes to the Policy are designed to facilitate the
risk management and governance of risk frameworks in a similar manner
to that for models under the existing framework. The processes,
controls and escalations used by the Clearing House with respect to the
testing and reviewing of models, as well the responsibilities of the
Clearing House's committees, management and the Board in relation to
the models would thus be applied to risk frameworks. The amendments
provide additional procedures for the management of risk parameter
changes, distinguishing between BAU and non-BAU (which are subject to
additional review and governance requirements). The Clearing House
believes these changes will further overall risk management at the
Clearing House, which would in turn promote the stability of the
Clearing House and the prompt and accurate clearance and settlement of
cleared contracts. The enhanced Policy is therefore also generally
consistent with the protection of investors and the public interest in
the safe operation of the Clearing House. (ICE Clear Europe would not
expect the amendments to affect the safeguarding of securities and
funds in ICE Clear Europe's custody or control or for which it is
responsible.) Accordingly, the amendments satisfy the requirements of
Section 17A(b)(3)(F).\6\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The amendments to the Policy are also consistent with relevant
provisions of Rule 17Ad-22.\7\ Rule 17Ad-22(e)(3)(i) provides that
``[e]ach covered clearing agency shall establish, implement, maintain
and enforce written policies and procedures reasonable designed to, as
applicable [. . .] identify, measure, monitor, and manage the range of
risks that arise in or are borne by the covered clearing agency''.\8\
The amendments to the Policy are intended to expand the considerations
of the existing model governance framework to apply to risk frameworks
as well as models and to distinguish BAU and non-BAU changes to risk
parameters for purposes of ongoing review and oversight. The expanded
scope of the Policy will, in ICE Clear Europe's view, assist the
Clearing House in the ongoing review and oversight of the models and
frameworks it uses in the operation of the Clearing House, and the
management of the risks that may arise from the use of such models and
frameworks. The amendments would thus strengthen the overall risk
management of the Clearing House. In ICE Clear Europe's view, the
amendments are therefore consistent with the requirements of Rule 17Ad-
22(e)(3)(i).\9\
---------------------------------------------------------------------------
\7\ 17 CFR 240.17 Ad-22.
\8\ 17 CFR 240.17 Ad-22(e)(3)(i).
\9\ 17 CFR 240.17 Ad-22(e)(3)(i).
---------------------------------------------------------------------------
Rule 17Ad-22(b)(4) provides ``[a] registered clearing agency that
performs central counterparty services shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to [. . .] [p]rovide for an annual model validation consisting
of evaluating the performance of the clearing agency's margin models
and the related parameters and assumptions associated with such models
by a qualified person who is free from influence from the persons
responsible for the development or operation of the models being
validated''.\10\ The amendments add non-BAU changes to risk parameters
but do not otherwise change the Policy's or Clearing House's practice
in reviewing and validating models. Under the Policy, the First Line
would still be responsible for development and operation of the models,
while the Risk Oversight Department (as part of the Second Line) is
responsible for performing independent validation exercises for the new
models, model changes and non-BAU changes to risk parameters. The Risk
Oversight Committee would also oversee independent validation exercises
performed by external validators. In ICE Clear Europe's view, the
amendments are therefore consistent with Rule 17Ad-22(b)(4).\11\
---------------------------------------------------------------------------
\10\ 17 CFR 240.17Ad-22(b)(4).
\11\ 17 CFR 240.17Ad-22(b)(4).
---------------------------------------------------------------------------
Rules 17Ad-22(e)(4)(vii) provides ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable [. . .] [e]ffectively
identify, measure, monitor, and manage its credit exposures to
participants and those arising from its payment, clearing, and
settlement processes, including by [. . .] [p]erforming a model
validation for its credit risk models not less than annually or more
frequently as may be contemplated by the covered clearing agency's risk
management framework established [. . .]'' \12\ and 17Ad-22(e)(6)(vii)
provides ``[e]ach covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable [. . .] [c]over, if the covered clearing
agency provides central counterparty services, its credit exposures to
its participants by establishing a risk-based margin system that, at a
minimum [. . .] [r]equires a model validation for the covered clearing
agency's margin system and related models to be performed not less than
annually, or more frequently as may be contemplated by the covered
clearing agency's risk management framework [. . .]''.\13\ The
amendments to the Policy expand the current scope to include risk
frameworks and do not otherwise change ICE Clear Europe's model
validation cycles. As per the Policy and the Clearing House's current
practice, the validation pipeline would still include annual validation
cycles. In ICE Clear Europe's view, the amendments are therefore
consistent with Rules 17Ad-22(e)(4)(vii) \14\ and 17Ad-
22(e)(6)(vii).\15\
---------------------------------------------------------------------------
\12\ 17 CFR 240.17Ad-22(e)(4)(vii).
\13\ 17 CFR 240.17Ad-22(e)(6)(vii).
\14\ 17 CFR 240.17Ad-22(e)(4)(vii).
\15\ 17 CFR 240.17Ad-22(e)(6)(vii).
---------------------------------------------------------------------------
[[Page 56903]]
Rule 17Ad-22(e)(2) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonable designed to, as applicable [. . .] provide for
governance arrangements that are clear and transparent'' \16\ and
``[s]pecify clear and direct lines of responsibility''.\17\ The
amendments to the Policy would extend the existing responsibilities of
the Clearing House's committees, management and the Board with respect
to models to also apply to risk frameworks. The amendments would also
clarify certain responsibilities of the Board and other relevant
committees and personnel as they relate to BAU and Non-BAU changes to
risk parameters. In ICE Clear Europe's view, the amendments are
therefore consistent with the requirements of Rule 17Ad-22(e)(2).\18\
---------------------------------------------------------------------------
\16\ 17 CFR 240.17 Ad-22(e)(2)(i).
\17\ 17 CFR 240.17 Ad-22(e)(2)(v).
\18\ 17 CFR 240.17 Ad-22(e)(2).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed amendments would
have any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The amendments
are being adopted to update and expand the Clearing House's Model Risk
Policy, which relate to the Clearing House's internal processes for
model and risk framework review, and overall risk management. The
amendments will not change the Clearing House Rules or Procedures and
will not change the rights or obligations of the Clearing House or
Clearing Members. ICE Clear Europe does not believe the amendments and
adoption would affect the costs of clearing, the ability of market
participants to access clearing, or the market for clearing services
generally. Therefore, ICE Clear Europe 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 amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any written comments 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 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-ICEEU-2023-019 on the subject line.
Paper Comments
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-ICEEU-2023-019. 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
a.m. and 3 p.m. Copies of such filings will also be available for
inspection and copying at the principal office of ICE Clear Europe and
on ICE Clear Europe's website at https://www.ice.com/clear-europe/regulation.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-ICEEU-2023-019 and
should be submitted on or before September 11, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17860 Filed 8-18-23; 8:45 am]
BILLING CODE 8011-01-P
