Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICC Collateral Risk Management Framework, 49252-49254 [2024-12686]
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49252
Federal Register / Vol. 89, No. 113 / Tuesday, June 11, 2024 / Notices
interest. Accordingly, the Commission
hereby waives the operative delay and
designates the proposed rule change
operative upon filing.18
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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 the filing also
will be available for inspection and
copying at the principal office of the
Exchange. 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–NYSENAT–2024–17 and should be
submitted on or before July 2, 2024.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
khammond on DSKJM1Z7X2PROD with NOTICES
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–
NYSENAT–2024–17 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–NYSENAT–2024–17. 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
18 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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[FR Doc. 2024–12688 Filed 6–10–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100274; File No. SR–ICC–
2024–003]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to the
ICC Collateral Risk Management
Framework
June 5, 2024.
I. Introduction
On April 16, 2024, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(2) of the Securities Exchange Act
of 1934 (the ‘‘Act’’) 1 and Rule19b–4
thereunder,2 a proposed rule change to
revise its Collateral Risk Management
Framework (‘‘CRMF’’). The proposed
rule change was published for comment
in the Federal Register on April 26,
2024.3 The Commission did not receive
comments regarding the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
19 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 Collateral Risk Management
Framework; Exchange Act Release No. 100008 (Apr.
22, 2024), 89 FR 32496 (Apr. 26, 2024) (File No.
SR–ICC–2024–003) (‘‘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 swaps (‘‘CDS’’)
contracts. The CRMF describes ICC’s
risk management methodology for the
collateral it accepts from Clearing
Participants to collateralize their
individual credit exposure to ICC,
including a description of ICC’s
quantitative risk management approach
that accounts for the risk associated
with fluctuations of collateral asset
prices (i.e., ‘‘haircuts’’). Collateral used
to cover obligations are subject to a
‘‘haircut’’ assessment, where the assets
are priced and posted at a discount to
account for certain market risks. The
current CRMF contemplates two risk
measures for the haircut model
approach—a 2-day 99.9% Value-at-Risk
(‘‘VaR’’) and a 5-day Expected Shortfall
(‘‘ES’’)—and requires ICC to use the
measure that produces the more
conservative result. Based on a
comprehensive review of its risk
calculations and data, ICC has
determined that VaR has never
produced the more conservative
measurement and, therefore, ICC has
always used the ES measurement
instead of VaR.4 These risk calculations
and data also show that ES will
continue to produce more conservative
results compared to VaR in essentially
all circumstances going forward.
Based on these results, the purpose of
the proposed rule change is to amend
ICC’s CRMF to permit ICC to rely solely
on the ES to establish its haircut factors
for the purposes of pricing and posting
collateral. To do so, the proposed rule
change would remove all references to
the VaR from the CRMF.
The proposed rule change also would
remove, renumber, and revise certain
figures in the CRMF. The current CRMF
contains various charts, graphs, and
other figures (collectively, ‘‘Figures’’) by
which ICC displays the data used to
establish the relevant measurements,
including Figures relevant to both the
VaR and ES measurements. To
effectively remove all references to VaR
from the CRMF, the proposed rule
change also would remove and revise
certain Figures as necessary to effectuate
the removal of VaR from the CRMF.
Specifically, in connection with the
deletion of the 2-day 99.9% VaR risk
measure, the proposed rule change
1 15
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Fmt 4703
Sfmt 4703
4 See Notice, supra note 3, at 32496. ICC has
provided responses to Commission requests for
collateral risk data and analysis as part of its
confidential Exhibit 3 to File No. SR–ICC–2024–
003. The confidential collateral risk data that ICC
provided to the Commission as part of this filing
shows the risk calculations conducted by ICC.
E:\FR\FM\11JNN1.SGM
11JNN1
Federal Register / Vol. 89, No. 113 / Tuesday, June 11, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
would remove Figures 11, 12, 26, 27, 28,
29, 38, and 39 because those figures
relate to the VaR risk measure,
including 1-day 99.9% VaR which was
used to calculate the VaR risk measure.
As a consequence of deleting those
figures, the proposed rule change would
renumber the remaining figures.
ICC has further determined that
altering certain Figures within the
CRMF would better illustrate the data
used to establish the remaining
applicable ES risk measure. As
discussed below, the changes are
consistent with the current practice of
the ICC under its current CRMF, or are
being amended for illustrative purposes,
and therefore will have no practical
impact.
Therefore, the proposed rule change
would revise certain figures to correct
the label on the y-axis from percentage
to bps and to make other typographical
fixes, specifically Figures 16, 17, 20, 21,
28 and 30 (as renumbered). It would
also correct the label on the x-axis in
certain figures. Specifically, the
proposed rule change would revise
Figures 12, 13, and 26 (as renumbered),
to correct the label on the x-axis from
percentage to bps. In doing so, the
proposed rule change would re-scale
those figures to reflect the change from
percentage to bps. While the change
from percentage to bps does not affect
the data underlying the figures, the
change affects the presentation of these
figures because the scale will be larger
as 1 bps equals 1/100 of a percentage
point.
The proposed rule change would
similarly re-scale Figure 5 to make the
x-axis bps and would also adjust the bin
size of Figure 5, which relates,
illustratively, to the thickness of the
bars in the figure. The phrase ‘‘bin size’’
in risk data refers to the width of
intervals used to group similar data
points when analyzing risk. A change in
bin size, while not changing the data,
can apportion the data more widely or
more narrowly across a figure within
newly created intervals. As the
distributions change, so could the trend
lines across the intervals change.
Finally, ICC has corrected certain
other deficiencies by updating a
footnote to a current link on its website,
and in correcting small typographical
errors elsewhere in the CRMF.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act requires
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
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17:09 Jun 10, 2024
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and regulations thereunder applicable to
the organization.5 Under the
Commission’s Rules of Practice, the
‘‘burden to demonstrate that a proposed
rule change is consistent with the
Exchange Act and the rules and
regulations issued thereunder . . . is on
the self-regulatory organization [‘SRO’]
that proposed the rule change.’’ 6
The description of a proposed rule
change, its purpose and operation, its
effect, and a legal analysis of its
consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,7 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Exchange Act and the
applicable rules and regulations.8
Moreover, ‘‘unquestioning reliance’’ on
an SRO’s representations in a proposed
rule change is not sufficient to justify
Commission approval of a proposed rule
change.9
After carefully considering the
proposed rule change, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Exchange Act and the rules and
regulations thereunder applicable to
ICC. More specifically, the Commission
finds that the proposed rule change is
consistent with Section 17A(b)(3)(F) of
the Act 10 and Rules 17Ad–22(e)(5)
thereunder.11
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.12 Based on the review of
the record, and for the reasons described
below, ICC’s proposed updates in the
manner described above are consistent
with the prompt and accurate clearance
and settlement of securities
transactions, derivatives agreements,
contracts, and transactions.
5 15
U.S.C. 78s(b)(2)(C).
700(b)(3), Commission Rules of Practice, 17
CFR 201.700(b)(3).
7 Id.
8 Id.
9 Susquehanna Int’l Group, LLP v. Securities and
Exchange Commission, 866 F.3d 442, 447 (D.C. Cir.
2017) (‘‘Susquehanna’’).
10 15 U.S.C. 78q–1(b)(3)(F).
11 17 CFR 240.17Ad–22(e)(5).
12 15 U.S.C. 78q–1(b)(3)(F).
6 Rule
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49253
The proposed rule change is
consistent with Section 17A(b)(3)(F) of
the Act because it would clarify the
CRMF by eliminating an unnecessary
risk measurement. The use of ES as a
risk measurement to establish haircut
factors for pricing collateral is already a
part of ICC’s risk methodology, and ICC
has determined that this calculation will
always be more conservative than, and
thus always used in lieu of, a VaR risk
measurement. The confidential risk
calculations and data provided by ICC
and reviewed by the Commission
demonstrate that ES has always been the
most conservative methodology for
setting collateral haircut factors when
compared to VaR and that it is
reasonable to expect that, going forward,
ES will continue to be the most
conservative methodology for setting
collateral haircut factors in essentially
all circumstances. Therefore, there
would be no actual change in the actual
haircut calculation when ICC applies its
risk methodology after the proposed
rule change is effectuated. Removing
VaR as a risk measurement would help
avoid the impression that ICC uses both
VaR and ES, and therefore would make
the CRMF clearer and easier to apply in
practice.
Having policies and procedures that
clearly and accurately document the
way ICC measures risk associated with
fluctuations of collateral asset prices is
an important component to the
effectiveness of ICC’s risk management
system and supports ICC’s ability to
maintain adequate financial resources
and collateral management resources.
The proposed rule change is,
consequently, consistent with the
prompt and accurate clearance and
settlement of securities transactions,
derivatives agreements, contracts, and
transactions, within the meaning of
Section 17A(b)(3)(F) of the Act.13
b. Consistency With Rule 17Ad–22(e)(5)
of the Act
Rule 17Ad–22(e)(5) under the Act
requires ICC to establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
limit the assets it accepts as collateral to
those with low credit, liquidity, and
market risks, and set and enforce
appropriately conservative haircuts and
concentration limits if it requires
collateral to manage its or its
participants’ credit exposure.14 Based
on the review of the record, and for the
reasons described below, ICC’s
13 15
14 17
E:\FR\FM\11JNN1.SGM
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(5).
11JNN1
49254
Federal Register / Vol. 89, No. 113 / Tuesday, June 11, 2024 / Notices
proposed revisions are consistent with
Rule 17Ad–22(e)(5).
As noted above, while ICC’s current
CRMF indicates that it will use either
VaR or ES to establish haircut factors for
the purposes of pricing and posting
collateral, in practice ES has always
produced the more conservative results
and therefore ICC has never utilized
VaR to set and enforce the haircut
factors it uses to price collateral. By
removing VaR from CRMF and
definitively identifying ES as the
exclusive risk methodology that ICC
will use to set and enforce the haircut
factors it uses to price collateral going
forward, the proposed revisions will
make the CRMF more clear and
transparent as a risk management
framework and help facilitate ICC’s
efficient and effective pricing of
Clearing Member collateral. Adjusting
the Figures in the CRMF to better
illustrate the data used by ICC will
likewise enhance the clarity and
transparency of ICC’s risk methodology,
and improve ICC’s ability to
communicate and explain its risk for
establishing haircut factors for the
purposes of pricing and posting
collateral.
Accordingly, the proposed rule
change is consistent with the
requirements of Rule 17Ad–22(e)(5)
under the Act.15
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) 16 of the Act and
Rule 17Ad–22(e)(5) thereunder.17
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 18 that the
proposed rule change (SR–ICC–2024–
003), be, and hereby is, approved.19
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–12686 Filed 6–10–24; 8:45 am]
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BILLING CODE 8011–01–P
15 17
CFR 240.17Ad–22(e)(5).
U.S.C. 78q–1(b)(3)(F).
17 17 CFR 240.17Ad–22(e)(5).
18 15 U.S.C. 78s(b)(2).
19 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).
20 17 CFR 200.30–3(a)(12).
16 15
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DEPARTMENT OF STATE
[Public Notice: 12414]
Annual Determination and Certification
of Shrimp-Harvesting Nations
Bureau of Oceans and
International Environmental and
Scientific Affairs, State Department.
ACTION: Notice of annual determination
and certification.
AGENCY:
On May 23, 2024, the
Department of State determined and
certified to Congress that wild-caught
shrimp harvested in the following
nations, particular fisheries of certain
nations, and Hong Kong are eligible to
enter the United States: Argentina,
Australia (Northern Prawn Fishery, the
Queensland East Coast Trawl Fishery,
the Spencer Gulf, and the Torres Strait
Prawn Fishery), the Bahamas, Belgium,
Belize, Canada, Chile, Colombia, Costa
Rica, Denmark, the Dominican
Republic, Ecuador, El Salvador, Estonia,
Fiji, France (French Guiana), Gabon,
Germany, Guatemala, Guyana,
Honduras, Iceland, Ireland, Italy (giant
red shrimp), Jamaica, Japan (shrimp
baskets in Hokkaido), Republic of Korea
(mosquito nets), Mexico, the
Netherlands, New Zealand, Nicaragua,
Nigeria, Norway, Oman, Panama, Peru,
Russia, Spain (Mediterranean red
shrimp), Sri Lanka, Suriname, Sweden,
the United Kingdom, and Uruguay. For
nations, economies, and fisheries not
listed above, only shrimp harvested
from aquaculture is eligible to enter the
United States. All shrimp imports into
the United States must be accompanied
by the DS–2031 Shrimp Exporter’s/
Importer’s Declaration.
DATES: This determination and
certification notice is effective on June
11, 2024.
FOR FURTHER INFORMATION CONTACT:
Jared Milton, Section 609 Program
Manager, Office of Marine Conservation,
Bureau of Oceans and International
Environmental and Scientific Affairs,
Department of State, 2201 C Street NW,
Washington, DC 20520–2758; telephone:
(202) 647–3263; email: DS2031@
state.gov.
SUPPLEMENTARY INFORMATION: Section
609 of Public Law 101–162 (‘‘Sec. 609’’)
prohibits imports of wild-caught shrimp
or products from shrimp harvested with
commercial fishing technology unless
the President certifies to the Congress by
May 1, 1991, and annually thereafter,
that either: (1) the harvesting nation has
adopted a regulatory program governing
the incidental taking of relevant species
of sea turtles in the course of
commercial shrimp harvesting that is
SUMMARY:
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
comparable to that of the United States
and that the average rate of that
incidental taking by the vessels of the
harvesting nation is comparable to the
average rate of incidental taking of sea
turtles by United States vessels in the
course of such harvesting; or (2) the
particular fishing environment of the
harvesting nation does not pose a threat
of the incidental taking of sea turtles in
the course of shrimp harvesting. The
President has delegated the authority to
make this certification to the Secretary
of State (‘‘Secretary’’) who further
delegated the authority within the
Department of State (‘‘Department’’).
The Revised Guidelines for the
Implementation of Sec. 609 were
published in the Federal Register on
July 8, 1999, at 64 FR 36946.
On May 23, 2024, the Department
certified to Congress the following
nations pursuant to section 609(b)(2)(A)
and (B) on the basis that they have
adopted a regulatory program governing
the incidental taking of relevant species
of sea turtles in the course of
commercial shrimp harvesting that is
comparable to that of the United States
and that the average rate of that
incidental taking by the vessels of the
harvesting nation is comparable to the
average rate of incidental taking of such
sea turtles by United States vessels in
the course of such harvesting: Colombia,
Ecuador, El Salvador, Gabon,
Guatemala, Guyana, Honduras, Mexico,
Nicaragua, Nigeria, Panama, and
Suriname. The Department also certified
pursuant to section 609(b)(2)(C) several
shrimp-harvesting nations and one
economy as having fishing
environments that do not pose a threat
to sea turtles, including the following
nations with shrimping grounds only in
cold waters where the risk of taking sea
turtles is negligible: Argentina, Belgium,
Canada, Chile, Denmark, Estonia,
Germany, Iceland, Ireland, the
Netherlands, New Zealand, Norway,
Russia, Sweden, the United Kingdom,
and Uruguay. Additionally, the
Department certified pursuant to section
609(b)(2)(C) that the following nations
and Hong Kong only harvest shrimp
using small boats with crews of less
than five that only use manual rather
than mechanical means to retrieve nets
or catch shrimp using other methods
that do not pose a threat of incidental
taking of sea turtles: the Bahamas,
Belize, Costa Rica, the Dominican
Republic, Fiji, Jamaica, Oman, Peru, and
Sri Lanka.
The Department has certified the
above listed nations and Hong Kong
pursuant to Sec. 609, and shrimp and
products from shrimp are eligible for
importation into the United States
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]]>Agencies
[Federal Register Volume 89, Number 113 (Tuesday, June 11, 2024)]
[Notices]
[Pages 49252-49254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12686]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100274; File No. SR-ICC-2024-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the ICC Collateral Risk
Management Framework
June 5, 2024.
I. Introduction
On April 16, 2024, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule19b-4 thereunder,\2\ a proposed rule change to revise its
Collateral Risk Management Framework (``CRMF''). The proposed rule
change was published for comment in the Federal Register on April 26,
2024.\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 ICC Collateral
Risk Management Framework; Exchange Act Release No. 100008 (Apr. 22,
2024), 89 FR 32496 (Apr. 26, 2024) (File No. SR-ICC-2024-003)
(``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 swaps (``CDS'') contracts. The CRMF
describes ICC's risk management methodology for the collateral it
accepts from Clearing Participants to collateralize their individual
credit exposure to ICC, including a description of ICC's quantitative
risk management approach that accounts for the risk associated with
fluctuations of collateral asset prices (i.e., ``haircuts'').
Collateral used to cover obligations are subject to a ``haircut''
assessment, where the assets are priced and posted at a discount to
account for certain market risks. The current CRMF contemplates two
risk measures for the haircut model approach--a 2-day 99.9% Value-at-
Risk (``VaR'') and a 5-day Expected Shortfall (``ES'')--and requires
ICC to use the measure that produces the more conservative result.
Based on a comprehensive review of its risk calculations and data, ICC
has determined that VaR has never produced the more conservative
measurement and, therefore, ICC has always used the ES measurement
instead of VaR.\4\ These risk calculations and data also show that ES
will continue to produce more conservative results compared to VaR in
essentially all circumstances going forward.
---------------------------------------------------------------------------
\4\ See Notice, supra note 3, at 32496. ICC has provided
responses to Commission requests for collateral risk data and
analysis as part of its confidential Exhibit 3 to File No. SR-ICC-
2024-003. The confidential collateral risk data that ICC provided to
the Commission as part of this filing shows the risk calculations
conducted by ICC.
---------------------------------------------------------------------------
Based on these results, the purpose of the proposed rule change is
to amend ICC's CRMF to permit ICC to rely solely on the ES to establish
its haircut factors for the purposes of pricing and posting collateral.
To do so, the proposed rule change would remove all references to the
VaR from the CRMF.
The proposed rule change also would remove, renumber, and revise
certain figures in the CRMF. The current CRMF contains various charts,
graphs, and other figures (collectively, ``Figures'') by which ICC
displays the data used to establish the relevant measurements,
including Figures relevant to both the VaR and ES measurements. To
effectively remove all references to VaR from the CRMF, the proposed
rule change also would remove and revise certain Figures as necessary
to effectuate the removal of VaR from the CRMF. Specifically, in
connection with the deletion of the 2-day 99.9% VaR risk measure, the
proposed rule change
[[Page 49253]]
would remove Figures 11, 12, 26, 27, 28, 29, 38, and 39 because those
figures relate to the VaR risk measure, including 1-day 99.9% VaR which
was used to calculate the VaR risk measure. As a consequence of
deleting those figures, the proposed rule change would renumber the
remaining figures.
ICC has further determined that altering certain Figures within the
CRMF would better illustrate the data used to establish the remaining
applicable ES risk measure. As discussed below, the changes are
consistent with the current practice of the ICC under its current CRMF,
or are being amended for illustrative purposes, and therefore will have
no practical impact.
Therefore, the proposed rule change would revise certain figures to
correct the label on the y-axis from percentage to bps and to make
other typographical fixes, specifically Figures 16, 17, 20, 21, 28 and
30 (as renumbered). It would also correct the label on the x-axis in
certain figures. Specifically, the proposed rule change would revise
Figures 12, 13, and 26 (as renumbered), to correct the label on the x-
axis from percentage to bps. In doing so, the proposed rule change
would re-scale those figures to reflect the change from percentage to
bps. While the change from percentage to bps does not affect the data
underlying the figures, the change affects the presentation of these
figures because the scale will be larger as 1 bps equals 1/100 of a
percentage point.
The proposed rule change would similarly re-scale Figure 5 to make
the x-axis bps and would also adjust the bin size of Figure 5, which
relates, illustratively, to the thickness of the bars in the figure.
The phrase ``bin size'' in risk data refers to the width of intervals
used to group similar data points when analyzing risk. A change in bin
size, while not changing the data, can apportion the data more widely
or more narrowly across a figure within newly created intervals. As the
distributions change, so could the trend lines across the intervals
change.
Finally, ICC has corrected certain other deficiencies by updating a
footnote to a current link on its website, and in correcting small
typographical errors elsewhere in the CRMF.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act requires the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization.\5\ Under the Commission's Rules of Practice, the ``burden
to demonstrate that a proposed rule change is consistent with the
Exchange Act and the rules and regulations issued thereunder . . . is
on the self-regulatory organization [`SRO'] that proposed the rule
change.'' \6\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(2)(C).
\6\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and specific
to support an affirmative Commission finding,\7\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the applicable rules and
regulations.\8\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\9\
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\7\ Id.
\8\ Id.
\9\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017) (``Susquehanna'').
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After carefully considering the proposed rule change, the
Commission finds that the proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to ICC. More specifically, the Commission finds
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act \10\ and Rules 17Ad-22(e)(5) thereunder.\11\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ 17 CFR 240.17Ad-22(e)(5).
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a. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of 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.\12\
Based on the review of the record, and for the reasons described below,
ICC's proposed updates in the manner described above are consistent
with the prompt and accurate clearance and settlement of securities
transactions, derivatives agreements, contracts, and transactions.
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed rule change is consistent with Section 17A(b)(3)(F) of
the Act because it would clarify the CRMF by eliminating an unnecessary
risk measurement. The use of ES as a risk measurement to establish
haircut factors for pricing collateral is already a part of ICC's risk
methodology, and ICC has determined that this calculation will always
be more conservative than, and thus always used in lieu of, a VaR risk
measurement. The confidential risk calculations and data provided by
ICC and reviewed by the Commission demonstrate that ES has always been
the most conservative methodology for setting collateral haircut
factors when compared to VaR and that it is reasonable to expect that,
going forward, ES will continue to be the most conservative methodology
for setting collateral haircut factors in essentially all
circumstances. Therefore, there would be no actual change in the actual
haircut calculation when ICC applies its risk methodology after the
proposed rule change is effectuated. Removing VaR as a risk measurement
would help avoid the impression that ICC uses both VaR and ES, and
therefore would make the CRMF clearer and easier to apply in practice.
Having policies and procedures that clearly and accurately document
the way ICC measures risk associated with fluctuations of collateral
asset prices is an important component to the effectiveness of ICC's
risk management system and supports ICC's ability to maintain adequate
financial resources and collateral management resources. The proposed
rule change is, consequently, consistent with the prompt and accurate
clearance and settlement of securities transactions, derivatives
agreements, contracts, and transactions, within the meaning of Section
17A(b)(3)(F) of the Act.\13\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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b. Consistency With Rule 17Ad-22(e)(5) of the Act
Rule 17Ad-22(e)(5) under the Act requires ICC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to limit the assets it accepts as collateral to
those with low credit, liquidity, and market risks, and set and enforce
appropriately conservative haircuts and concentration limits if it
requires collateral to manage its or its participants' credit
exposure.\14\ Based on the review of the record, and for the reasons
described below, ICC's
[[Page 49254]]
proposed revisions are consistent with Rule 17Ad-22(e)(5).
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\14\ 17 CFR 240.17Ad-22(e)(5).
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As noted above, while ICC's current CRMF indicates that it will use
either VaR or ES to establish haircut factors for the purposes of
pricing and posting collateral, in practice ES has always produced the
more conservative results and therefore ICC has never utilized VaR to
set and enforce the haircut factors it uses to price collateral. By
removing VaR from CRMF and definitively identifying ES as the exclusive
risk methodology that ICC will use to set and enforce the haircut
factors it uses to price collateral going forward, the proposed
revisions will make the CRMF more clear and transparent as a risk
management framework and help facilitate ICC's efficient and effective
pricing of Clearing Member collateral. Adjusting the Figures in the
CRMF to better illustrate the data used by ICC will likewise enhance
the clarity and transparency of ICC's risk methodology, and improve
ICC's ability to communicate and explain its risk for establishing
haircut factors for the purposes of pricing and posting collateral.
Accordingly, the proposed rule change is consistent with the
requirements of Rule 17Ad-22(e)(5) under the Act.\15\
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\15\ 17 CFR 240.17Ad-22(e)(5).
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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) \16\
of the Act and Rule 17Ad-22(e)(5) thereunder.\17\
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\16\ 15 U.S.C. 78q-1(b)(3)(F).
\17\ 17 CFR 240.17Ad-22(e)(5).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\18\ that the proposed rule change (SR-ICC-2024-003), be, and hereby
is, approved.\19\
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\18\ 15 U.S.C. 78s(b)(2).
\19\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12686 Filed 6-10-24; 8:45 am]
BILLING CODE 8011-01-P
