Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Stress Testing Framework, 67405-67407 [2023-21340]
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Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices
solicitation efforts, if any, for alternative
plan processors, the alternatives
considered, and the reasons for the
selection of the plan processor. The
Commission estimates that the
preparation and materials related to the
selection of a plan processor would
result in an average aggregate burden of
approximately 283 hours per year (25
SROs × 11.33 hours = 283.33 rounded
down to 233). In addition, the
Commission estimates that the
preparation and submission of materials
related to the selection of a plan
processor would result in an average
aggregate cost of approximately $8,333
per year (25 SROs × $333.33 = $8,333.33
rounded down to $8,333).
The above estimates result in a total
annual industry burden of
approximately 12,432 hours (850 + 125
+ 11,050 + 124 + 283) and a total annual
industry cost of approximately $483,333
($150,000 + $325,000 + $8,333).
Compliance with Rule 608 is
mandatory. The text of the NMS Plans
and any amendments will not be
confidential but published on a
designated website or a plan website. To
the extent that Rule 608 requires the
SROs to submit confidential information
to the Commission, that information
will be kept confidential subject to the
provisions of applicable law.1 The SROs
are required by law to retain the records
and information that are collected
pursuant to Rule 608 for a period of not
less than 5 years, the first 2 years in an
easily accessible place.2 Rule 608 does
not affect this existing requirement.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent by
October 30, 2023 to (i) www.reginfo.gov/
public/do/PRAMain and (ii) David
Bottom, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o John Pezzullo, 100 F
Street NE, Washington, DC 20549, or by
sending an email to: PRA_Mailbox@
sec.gov.
1 See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x
(governing the public availability of information
obtained by the Commission).
2 See 17 CFR 240.17a–1(b).
VerDate Sep<11>2014
21:46 Sep 28, 2023
Jkt 259001
Dated: September 26, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21427 Filed 9–28–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98496; File No. SR–ICC–
2023–012]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to the
Stress Testing Framework
September 25, 2023.
I. Introduction
On August 8, 2023, 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 (‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change to
update its Stress Testing Framework
(‘‘STF’’). The proposed rule change was
published for comment in the Federal
Register on August 21, 2023.3 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
ICC is registered with the Commission
as a clearing agency for the purpose of
clearing credit default swap (‘‘CDS’’)
contracts. ICC clears CDS contracts for
its members, which it refers to as
Clearing Participants.4 Clearing CDS
contracts for Clearing Participants
presents certain risks to ICC, such as
exposure to systemic risk, which may
include, but is not limited to, historic
and current market volatility, and
fluctuating interest rates. ICC measures
and attempts to protect against such
systemic risk by performing stress tests
and, at times, adjusting the parameters
underlying these stress-testing
scenarios.
This proposed rule change aims to
update two parameters incorporated
into several of ICC’s stress-testing
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Self-Regulatory Organizations; ICE Clear Credit
LLC; Notice of Filing of Proposed Rule Change
Relating to the Stress Testing Framework; Exchange
Act Release No. 98140 (Aug. 15, 2023); 88 FR 56899
(Aug. 21, 2023) (File No. SR–ICC–2023–012)
(‘‘Notice’’).
4 Capitalized terms not otherwise defined herein
have the meanings assigned to them in ICC’s
Clearing Rules.
2 17
PO 00000
Frm 00181
Fmt 4703
Sfmt 4703
67405
scenarios. The parameters relate to the
interest rate sensitivity analysis applied
to two sets of historically observed,
extreme but plausible market scenarios
described in ICC’s STF, and measure the
magnitude of interest rate shocks during
the applicable stressed periods used to
estimate average haircut values of
certain government securities. In
particular, ICC proposes to change the
stress period of the default-free Euro
discount interest rate curve used in
ICC’s interest rate sensitivity analysis
and revise the description of the credit
crisis period for the default-free U.S.
Dollar discount interest rate curve.
Currently under the STF, Section 11,
which describes ICC’s interest rate
sensitivity analysis, incorporates two
currency-specific stress test parallel
shifts (i.e., up and down) of the defaultfree discount interest rate for both CDS
and CDS Index Options instruments.
The magnitude of the interest rate stress
scenarios reflects the largest shock,
estimated using the collateral haircut
model, during a selected stress period
for the applicable sovereign debt. The
current stress period of the default-free
Euro discount interest rate curve
references the ‘‘western European
credit’’ crisis period and specifies exact
start and end dates between 2011 and
2012. The selected stress periods listed
in Section 11 are subject to periodic
review. Following such a review, ICC
proposes to update the stress period
used to shock the Euro default-free
discount interest rate by replacing the
current language with ‘‘2022/2023
inflation’’ crisis period and not
specifying start and end dates.
ICC states that changing the stress
period of the default-free Euro discount
interest rate curve would more
accurately reflect the current volatile
interest rate period, which began in
2022 and continues into 2023 due to the
fast pace of U.S. Dollar and Euro interest
rate increases.5 According to ICC, the
impact to the Euro interest rate volatility
has been significant because of the
sudden and rapid increases in Euro
interest rates by the European Central
Bank in an effort to curb multi-decade
high inflation.6 ICC indicates that the
interest rate volatility observed during
the ongoing ‘‘2022/2023 inflation’’ crisis
period is greater than that observed
during the 2011–2012 ‘‘western
European credit’’ crisis period currently
listed in the STF because the collateral
haircuts observed in 2022–2023 exceed
those detected in 2011–2012.7 ICC has
5 Notice,
at 56899.
6 Id.
7 Id.
E:\FR\FM\29SEN1.SGM
29SEN1
67406
Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices
set an internal start date for the ‘‘2022/
2023 inflation’’ crisis period. However,
as the 2022–2023 period of volatility
remains ongoing, ICC states that it will
continue to monitor interest rate
volatility for any new volatility peak
observed in the current ‘‘2022/2023
inflation’’ crisis period for the defaultfree Euro discount interest curve.
Additionally, ICC proposes to make
an analogous clarifying language change
to the identification of the default-free
U.S. Dollar discount interest rate curve
in Section 11 of the STF. Specifically,
the proposed change would remove the
exact start and end dates of the credit
crisis period from Section 11 and
replace them with the description
written as the ‘‘2008/2009’’ credit crisis
period. The exact start and end dates of
the ‘‘2008/2009’’ credit crisis period are
listed in Section 5 of STF and would
remain unchanged. This proposed rule
change would not alter the time span or
affect any other characteristic of the
parameter covering the ‘‘2008/2009’’
credit crisis period for the default-free
U.S. Dollar discount interest rate curve.
lotter on DSK11XQN23PROD with NOTICES1
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.8 For the
reasons discussed below, the
Commission finds that the proposed
rule change is consistent with Section
17A(b)(3)(F) of the Act 9 and Rule 17Ad22(e)(4)(ii) and (vi) thereunder.10
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 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.11
The proposed rule change would
update the period covering the defaultfree Euro discount interest curve, which
is part of the interest rate sensitivity
analysis applied to several of ICC’s
stress-testing scenarios in its STF.
Specifically, the proposed 2022/2023
inflation crisis period, which is ongoing,
has exhibited greater interest rate
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
10 17 CFR 240.17Ad–22(e)(4)(ii) and (vi).
11 15 U.S.C. 78q–1(b)(3)(F).
volatility than that observed during the
2011–2012 western European credit
crisis period. The Commission believes
that this proposed rule change would
provide a more accurate magnitude of
the largest shock to the applicable
sovereign debt used as part of the
parameters underlying ICC’s stress
scenarios. Recalibrating the magnitude
of the largest shock would enhance
ICC’s ability to identify and measure the
risk of a credit exposure to defaulting
Clearing Participants, which should, in
turn, increase the likelihood that ICC
calculates and collects sufficient
financial resources to mitigate this
potential exposure and enhance ICC’s
ability to manage a default by
continuing to promptly and accurately
clear and settle securities transactions.
Additionally, ICC’s proposal to
streamline the description of the 2008/
2009 credit crisis period applicable to
the default-free U.S. dollar interest rate
curve would provide consistency to the
language relevant to the interest rate
sensitivity analysis in the STF. This, in
turn, would assist in facilitating the
execution of the various stress tests,
thus helping to ensure the adequacy of
systemic risk protections through
appropriate financial resource collection
during a Clearing Participant default,
and promoting the prompt and accurate
clearance and settlement of securities
transactions.
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)(4)(ii) and (vi)
Rule 17Ad–22(e)(4)(ii) requires ICC 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 ICC in
extreme but plausible market
conditions.13 Rule 17Ad–22(e)(4)(vi) 14
requires ICC to establish, implement,
maintain, and enforce written policies
and procedures reasonably designed, as
applicable, to effectively identify,
8 15
9 15
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21:46 Sep 28, 2023
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12 Id.
13 17
14 17
PO 00000
CFR 240.17Ad–22(e)(4)(ii).
CFR 240.17Ad–22(e)(4)(vi).
Frm 00182
Fmt 4703
Sfmt 4703
measure, monitor, and manage its credit
exposures to participants and those
arising from its payment, clearing, and
settlement processes, including by
testing the sufficiency of its total
financial resources available to meet the
minimum financial resource
requirements of Rule 17Ad–
22(e)(4)(ii).15
The Commission believes that
replacing the 2011–2012 western
European credit crisis period with the
2022/2023 inflation crisis period
relating to the default-free Euro discount
interest rate curve used for interest rate
sensitivity analysis would provide a
more effective measurement of the
required shock in stress testing. This
updated measurement may better ensure
ICC’s ability to monitor and manage its
credit exposures and to maintain
additional financial resources to enable
it to cover a wide range of foreseeable
stress scenarios. Likewise, the
Commission believes that the simplified
description of the 2008/2009 credit
crisis period applicable to the defaultfree U.S. dollar interest rate curve
would enhance the readability and
usability of the STF, thereby enhancing
the documentation for its users and
helping ensure that it remains
transparent and consistent to support
the effectiveness of ICC’s risk
management system.
For these reasons, the Commission
believes that the proposed rule changes
are therefore consistent with the
requirements of Rules 17Ad–22(e)(4)(ii)
and (e)(4)(vi).16
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,17 and
Rule 17Ad–22(e)(4)(ii) and (vi)
thereunder.18
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 19 that the
proposed rule change (SR–ICC–2023–
012), be, and hereby is, approved.20
15 17
CFR 240.17Ad–22(e)(4)(ii).
CFR 240.17Ad–22(e)(4)(ii) and (vi).
17 15 U.S.C. 78q–1(b)(3)(F).
18 17 CFR 240.17Ad–22(e)(4)(ii) and (vi).
19 15 U.S.C. 78s(b)(2).
20 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).
16 17
E:\FR\FM\29SEN1.SGM
29SEN1
Federal Register / Vol. 88, No. 188 / Friday, September 29, 2023 / Notices
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21340 Filed 9–28–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–422, OMB Control No.
3235–0471]
Dated: September 26, 2023.
Sherry R. Haywood,
Assistant Secretary.
lotter on DSK11XQN23PROD with NOTICES1
Submission for OMB Review;
Comment Request; Extension: Rule
15c1–5
[FR Doc. 2023–21429 Filed 9–28–23; 8:45 am]
BILLING CODE 8011–01–P
Upon Written Request, Copies Available
From: U.S. Securities and Exchange
Commission, Office of FOIA
Services, 100 F Street NE,
Washington, DC 20549–2736
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 15c1–5 (17 CFR 240.15c1–5) under
the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.).
Rule 15c1–5 states that any brokerdealer controlled by, controlling, or
under common control with the issuer
of a security that the broker-dealer is
trying to sell to or buy from a customer
must give the customer written
notification disclosing the control
relationship at or before completion of
the transaction. The Commission
estimates that 175 respondents provide
notifications annually under Rule 15c1–
5 and that each respondent would
spend approximately 10 hours per year
complying with the requirements of the
rule for a total burden of approximately
1,750 hours per year. There is no
retention period requirement under
Rule 15c1–5. This Rule does not involve
the collection of confidential
information.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
21 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
21:46 Sep 28, 2023
Jkt 259001
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent by
October 30, 2023 to
(i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o John Pezzullo, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98508; File No. SR–NCC–
2023–007]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change by National
Securities Clearing Corporation To
Modify the Amended and Restated
Stock Options and Futures Settlement
Agreement and Make Certain
Revisions to the NSCC Rules
September 25, 2023.
On August 10, 2023, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2023–
003 pursuant to Section 19(b) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) 1 and Rule 19b–4 2
thereunder to modify the Amended and
Restated Stock Options and Futures
Settlement Agreement between NSCC
and The Options Clearing Corporation
and make certain related revisions to
Rule 18, Procedure III and Addendum K
of the NSCC Rules & Procedures. The
proposed rule change was published for
public comment in the Federal Register
on August 30, 2023.3 The Commission
has received no comments regarding the
proposal described in the proposed rule
change.
Section 19(b)(2)(i) of the Exchange
Act 4 provides that, within 45 days of
the publication of notice of the filing of
a proposed rule change, the Commission
shall either approve the proposed rule
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 98213
(Aug. 24, 2023), 88 FR 59968 (Aug. 30, 2023) (File
No. SR–NSCC–2023–007) (‘‘Notice of Filing’’).
4 15 U.S.C. 78s(b)(2)(i).
change, disapprove the proposed rule
change, or institute proceedings to
determine whether the proposed rule
change should be disapproved unless
the Commission extends the period
within which it must act as provided in
Section 19(b)(2)(ii) of the Exchange
Act.5 Section 19(b)(2)(ii) of the
Exchange Act allows the Commission to
designate a longer period for review (up
to 90 days from the publication of notice
of the filing of a proposed rule change)
if the Commission finds such longer
period to be appropriate and publishes
its reasons for so finding, or as to which
the self-regulatory organization
consents.6
The 45th day after publication of the
Notice of Filing is October 14, 2023. In
order to provide the Commission with
sufficient time to consider the Proposed
Rule Change, the Commission finds that
it is appropriate to designate a longer
period within which to take action on
the proposed rule change and therefore
is extending this 45-day time period.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the
Exchange Act,7 designates November
28, 2023, as the date by which the
Commission shall either approve,
disapprove, or institute proceedings to
determine whether to disapprove
proposed rule change SR–NCC–2023–
007.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–21345 Filed 9–28–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98505; File No. SR–OCC–
2023–007]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Designation of Longer Period for
Commission Action on Proposed Rule
Change Concerning Modifications to
the Amended and Restated Stock
Options and Futures Settlement
Agreement Between the Options
Clearing Corporation and the National
Securities Clearing Corporation
September 25, 2023.
On August 10, 2023, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
2 17
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Sfmt 4703
67407
5 15
U.S.C. 78 s(b)(2)(ii).
6 Id.
7 Id.
8 17
E:\FR\FM\29SEN1.SGM
CFR 200.30–3(a)(31).
29SEN1
]]>Agencies
[Federal Register Volume 88, Number 188 (Friday, September 29, 2023)]
[Notices]
[Pages 67405-67407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21340]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98496; File No. SR-ICC-2023-012]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Stress Testing Framework
September 25, 2023.
I. Introduction
On August 8, 2023, 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 (``Act''),\1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to update its
Stress Testing Framework (``STF''). The proposed rule change was
published for comment in the Federal Register on August 21, 2023.\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\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Filing of Proposed Rule Change Relating to the Stress Testing
Framework; Exchange Act Release No. 98140 (Aug. 15, 2023); 88 FR
56899 (Aug. 21, 2023) (File No. SR-ICC-2023-012) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
ICC is registered with the Commission as a clearing agency for the
purpose of clearing credit default swap (``CDS'') contracts. ICC clears
CDS contracts for its members, which it refers to as Clearing
Participants.\4\ Clearing CDS contracts for Clearing Participants
presents certain risks to ICC, such as exposure to systemic risk, which
may include, but is not limited to, historic and current market
volatility, and fluctuating interest rates. ICC measures and attempts
to protect against such systemic risk by performing stress tests and,
at times, adjusting the parameters underlying these stress-testing
scenarios.
---------------------------------------------------------------------------
\4\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in ICC's Clearing Rules.
---------------------------------------------------------------------------
This proposed rule change aims to update two parameters
incorporated into several of ICC's stress-testing scenarios. The
parameters relate to the interest rate sensitivity analysis applied to
two sets of historically observed, extreme but plausible market
scenarios described in ICC's STF, and measure the magnitude of interest
rate shocks during the applicable stressed periods used to estimate
average haircut values of certain government securities. In particular,
ICC proposes to change the stress period of the default-free Euro
discount interest rate curve used in ICC's interest rate sensitivity
analysis and revise the description of the credit crisis period for the
default-free U.S. Dollar discount interest rate curve.
Currently under the STF, Section 11, which describes ICC's interest
rate sensitivity analysis, incorporates two currency-specific stress
test parallel shifts (i.e., up and down) of the default-free discount
interest rate for both CDS and CDS Index Options instruments. The
magnitude of the interest rate stress scenarios reflects the largest
shock, estimated using the collateral haircut model, during a selected
stress period for the applicable sovereign debt. The current stress
period of the default-free Euro discount interest rate curve references
the ``western European credit'' crisis period and specifies exact start
and end dates between 2011 and 2012. The selected stress periods listed
in Section 11 are subject to periodic review. Following such a review,
ICC proposes to update the stress period used to shock the Euro
default-free discount interest rate by replacing the current language
with ``2022/2023 inflation'' crisis period and not specifying start and
end dates.
ICC states that changing the stress period of the default-free Euro
discount interest rate curve would more accurately reflect the current
volatile interest rate period, which began in 2022 and continues into
2023 due to the fast pace of U.S. Dollar and Euro interest rate
increases.\5\ According to ICC, the impact to the Euro interest rate
volatility has been significant because of the sudden and rapid
increases in Euro interest rates by the European Central Bank in an
effort to curb multi-decade high inflation.\6\ ICC indicates that the
interest rate volatility observed during the ongoing ``2022/2023
inflation'' crisis period is greater than that observed during the
2011-2012 ``western European credit'' crisis period currently listed in
the STF because the collateral haircuts observed in 2022-2023 exceed
those detected in 2011-2012.\7\ ICC has
[[Page 67406]]
set an internal start date for the ``2022/2023 inflation'' crisis
period. However, as the 2022-2023 period of volatility remains ongoing,
ICC states that it will continue to monitor interest rate volatility
for any new volatility peak observed in the current ``2022/2023
inflation'' crisis period for the default-free Euro discount interest
curve.
---------------------------------------------------------------------------
\5\ Notice, at 56899.
\6\ Id.
\7\ Id.
---------------------------------------------------------------------------
Additionally, ICC proposes to make an analogous clarifying language
change to the identification of the default-free U.S. Dollar discount
interest rate curve in Section 11 of the STF. Specifically, the
proposed change would remove the exact start and end dates of the
credit crisis period from Section 11 and replace them with the
description written as the ``2008/2009'' credit crisis period. The
exact start and end dates of the ``2008/2009'' credit crisis period are
listed in Section 5 of STF and would remain unchanged. This proposed
rule change would not alter the time span or affect any other
characteristic of the parameter covering the ``2008/2009'' credit
crisis period for the default-free U.S. Dollar discount interest rate
curve.
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.\8\ For the reasons discussed below, the Commission finds
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act \9\ and Rule 17Ad-22(e)(4)(ii) and (vi) thereunder.\10\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(2)(C).
\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ 17 CFR 240.17Ad-22(e)(4)(ii) and (vi).
---------------------------------------------------------------------------
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 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.\11\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed rule change would update the period covering the
default-free Euro discount interest curve, which is part of the
interest rate sensitivity analysis applied to several of ICC's stress-
testing scenarios in its STF. Specifically, the proposed 2022/2023
inflation crisis period, which is ongoing, has exhibited greater
interest rate volatility than that observed during the 2011-2012
western European credit crisis period. The Commission believes that
this proposed rule change would provide a more accurate magnitude of
the largest shock to the applicable sovereign debt used as part of the
parameters underlying ICC's stress scenarios. Recalibrating the
magnitude of the largest shock would enhance ICC's ability to identify
and measure the risk of a credit exposure to defaulting Clearing
Participants, which should, in turn, increase the likelihood that ICC
calculates and collects sufficient financial resources to mitigate this
potential exposure and enhance ICC's ability to manage a default by
continuing to promptly and accurately clear and settle securities
transactions.
Additionally, ICC's proposal to streamline the description of the
2008/2009 credit crisis period applicable to the default-free U.S.
dollar interest rate curve would provide consistency to the language
relevant to the interest rate sensitivity analysis in the STF. This, in
turn, would assist in facilitating the execution of the various stress
tests, thus helping to ensure the adequacy of systemic risk protections
through appropriate financial resource collection during a Clearing
Participant default, and promoting the prompt and accurate clearance
and settlement of securities transactions.
For these reasons, the Commission believes the proposed rule
changes are consistent with Section 17A(b)(3)(F) of the Act.\12\
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\12\ Id.
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B. Consistency With Rule 17Ad-22(e)(4)(ii) and (vi)
Rule 17Ad-22(e)(4)(ii) requires ICC 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 ICC in
extreme but plausible market conditions.\13\ Rule 17Ad-22(e)(4)(vi)
\14\ requires ICC 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 testing the sufficiency of its total
financial resources available to meet the minimum financial resource
requirements of Rule 17Ad-22(e)(4)(ii).\15\
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\13\ 17 CFR 240.17Ad-22(e)(4)(ii).
\14\ 17 CFR 240.17Ad-22(e)(4)(vi).
\15\ 17 CFR 240.17Ad-22(e)(4)(ii).
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The Commission believes that replacing the 2011-2012 western
European credit crisis period with the 2022/2023 inflation crisis
period relating to the default-free Euro discount interest rate curve
used for interest rate sensitivity analysis would provide a more
effective measurement of the required shock in stress testing. This
updated measurement may better ensure ICC's ability to monitor and
manage its credit exposures and to maintain additional financial
resources to enable it to cover a wide range of foreseeable stress
scenarios. Likewise, the Commission believes that the simplified
description of the 2008/2009 credit crisis period applicable to the
default-free U.S. dollar interest rate curve would enhance the
readability and usability of the STF, thereby enhancing the
documentation for its users and helping ensure that it remains
transparent and consistent to support the effectiveness of ICC's risk
management system.
For these reasons, the Commission believes that the proposed rule
changes are therefore consistent with the requirements of Rules 17Ad-
22(e)(4)(ii) and (e)(4)(vi).\16\
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\16\ 17 CFR 240.17Ad-22(e)(4)(ii) and (vi).
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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,\17\ and Rule 17Ad-22(e)(4)(ii) and (vi) thereunder.\18\
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\17\ 15 U.S.C. 78q-1(b)(3)(F).
\18\ 17 CFR 240.17Ad-22(e)(4)(ii) and (vi).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\19\ that the proposed rule change (SR-ICC-2023-012), be, and hereby
is, approved.\20\
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\19\ 15 U.S.C. 78s(b)(2).
\20\ 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).
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[[Page 67407]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21340 Filed 9-28-23; 8:45 am]
BILLING CODE 8011-01-P
