80 FR 12224 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Granting Approval of Proposed Rule Change To Formalize the ICC Operational Risk Management Framework

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 44 (March 6, 2015)

Page Range		12224-12225
FR Document		2015-05155
Federal Register, Volume 80 Issue 44 (Friday, March 6, 2015)
[Federal Register Volume 80, Number 44 (Friday, March 6, 2015)]
[Notices]
[Pages 12224-12225]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-05155]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74399; File No. SR-ICC-2014-19]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Granting Approval of Proposed Rule Change To Formalize the ICC 
Operational Risk Management Framework

March 2, 2015.

I. Introduction

    On November 18, 2014, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2014-19 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The 
proposed rule change was published for comment in the Federal Register 
on December 2, 2014.\3\ The Commission received no comment letters 
regarding the proposed change. On January 16, 2015, the Commission 
extended the time period in which to either approve, disapprove, or 
institute proceedings to determine whether to disapprove the proposed 
rule change to March 2, 2015.\4\ For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-73684 (Nov. 25, 
2014), 79 FR 71495 (Dec. 2, 2014) (SR-ICC-2014-19).
    \4\ Securities Exchange Act Release No. 34-74082 (Jan. 16, 
2015), 80 FR 3687 (Jan. 23, 2015) (SR-ICC-2014-19).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    ICC is proposing to update and formalize ICC's Operational Risk 
Management Framework. According to ICC, the Operational Risk Management 
Framework is designed to create a program of risk assessment and 
oversight to identify, monitor, and manage plausible sources of 
operational risk,\5\ and to timely manage and report operational 
performance measures. ICC further states that the operational risk 
program is designed to evaluate and mitigate operations risk presented 
to ICC by its partners, related entities, and vendors. According to 
ICC, the Operational Risk Management Framework is overseen by the ICC 
Board, ICC department heads and the Chief Compliance Officer, and 
internal audit performs reviews of the operational risk management 
processes.
---------------------------------------------------------------------------

    \5\ ``Operational risk'' is defined in the ICC Operational Risk 
Management Framework as the risk that deficiencies in information 
systems, internal processes, personnel, or disruptions from external 
events will result in the reduction, deterioration, or breakdown of 
services.
---------------------------------------------------------------------------

    Under the Operational Risk Management Framework, the Operational 
Risk Manager has the responsibility and authority to develop and 
enforce, in consultation with the ICC Board and appropriate members of 
senior management, the operational risk program, which applies to all 
ICC activities, groups, functions and locations. The Operational Risk 
Management Framework further provides that the Operational Risk Manager 
is the owner of the Operational Risk Management Framework document, 
that the initial document and any material amendments require review 
and approval by the appropriate members of senior management and the 
ICC Board, and that the Operational Risk Manager reports to the Chief 
Compliance Officer who reports directly to the ICC Board.
    There are several components to the ICC Operational Risk Management 
Framework. ICC states that the Operational Risk Management Framework 
establishes clearly defined operational performance objectives that 
serve as benchmarks to evaluate efficiency and effectiveness, promote 
confidence among management and participants, and evaluate operational 
performance against expectations. The Operational Risk Management 
Framework states ICC's goals of identifying, monitoring, and managing 
all plausible sources of operational risk and establishing clear 
policies and procedures to address presented risk scenarios. For 
example, the Operational Risk Management Framework incorporates ICC's 
risk assessment methodology to identify and evaluate potential 
operational risks in each of its major clearing processes, as well as 
procedures for recommending controls to mitigate risks identified in 
the risk assessment. The Operational Risk Management Framework also 
contains information regarding how ICC leverages certain shared 
infrastructures within the Intercontinental Exchange, Inc. family as 
part of its operational risk management program.
    Additionally, the Operational Risk Management Framework details the 
Operational Risk Manager's responsibilities in terms of business 
continuity planning, vendor risk management, and the release of new 
products, processes, and initiatives. Under the Operational Risk 
Management Framework, the Operational Risk Manager is responsible for 
operational risk reporting, which includes reporting and addressing 
significant operational risk weaknesses or failures timely and 
appropriately (including escalation to the appropriate members of 
senior management and the ICC Audit Committee and the Board when 
necessary), and providing ongoing reporting to appropriate members of 
senior management and periodic reporting to the ICC Board and the ICC 
Audit Committee on the operational risk program and significant control 
matters.

[[Page 12225]]

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \6\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \7\ requires, among other things, that the rules of a 
clearing agency are designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible and, in general, to protect investors and the public 
interest. In addition, Rule 17Ad-22(d)(4) \8\ requires registered 
clearing agencies, among other things, to establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to identify sources of operational risk and minimize them 
through the development and implementation of appropriate systems, 
controls, and procedures and have business continuity plans that allow 
for timely recovery of operations and fulfillment of a clearing 
agency's obligations.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 240.17Ad-22(d)(4).
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change is consistent 
with Section 17A of the Act \9\ and the rules thereunder applicable to 
ICC. ICC's Operational Risk Management Framework establishes clear 
policies and procedures to identify and evaluate potential operational 
risks in each of its major clearing processes, and to recommend 
controls to mitigate identified risks, each of which are reasonably 
designed to identify, monitor, and manage of all plausible sources of 
operational risk. Furthermore, the Operational Risk Management 
Framework establishes clearly defined operational performance 
objectives that are expected to serve as benchmarks for evaluating 
operational efficiency and effectiveness, and to evaluate operational 
performance measurements against such objectives, each of which are 
expected to enhance ICC's ability to mitigate operational risk. 
Finally, the Operational Risk Management Framework incorporates a 
business continuity plan that is expected to allow for timely recovery 
of operations and fulfillment of ICC's obligations upon disruption. The 
Commission therefore believes that the proposed rule change is 
reasonably designed to identify sources of operational risk and 
minimize them through the development and implementation of appropriate 
systems, controls, and procedures and have business continuity plans 
that allow for timely recovery of operations and fulfillment of a 
clearing agency's obligations, consistent with the requirements of Rule 
17Ad-22(d)(4).\10\ Accordingly, the Commission believes that the 
proposed rule change is designed to promote the prompt and accurate 
settlement of securities and derivatives transactions, consistent with 
Section 17A(b)(3)(F) of the Act.\11\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22(d)(4).
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \12\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-ICC-2014-19) be, 
and hereby is, approved.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 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.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

Brent J. Fields,
Secretary.
[FR Doc. 2015-05155 Filed 3-5-15; 8:45 am]
 BILLING CODE 8011-01-P
12224 Federal Register / Vol. 80, No. 44 / Friday, March 6, 2015 / Notices

the estimated total annual cost burden (‘‘Commission’’) the proposed rule document, that the initial document and
allocated to Form N 4 would be change SR–ICC–2014–19 pursuant to any material amendments require
$36,308.889 ((210 × $23,013) + (1,443 × Section 19(b)(1) of the Securities review and approval by the appropriate
$21,813)). Exchange Act of 1934 (‘‘Act’’) 1 and Rule members of senior management and the
Providing the information required by 19b–4 thereunder.2 The proposed rule ICC Board, and that the Operational
Form N–4 is mandatory. Responses will change was published for comment in Risk Manager reports to the Chief
not be kept confidential. Estimates of the Federal Register on December 2, Compliance Officer who reports directly
average burden hours are made solely 2014.3 The Commission received no to the ICC Board.
for the purposes of the Paperwork comment letters regarding the proposed
Reduction Act, and are not derived from change. On January 16, 2015, the There are several components to the
a comprehensive or even a Commission extended the time period ICC Operational Risk Management
representative survey or study of the in which to either approve, disapprove, Framework. ICC states that the
costs of Commission rules and forms. or institute proceedings to determine Operational Risk Management
An agency may not conduct or sponsor, whether to disapprove the proposed Framework establishes clearly defined
and a person is not required to respond rule change to March 2, 2015.4 For the operational performance objectives that
to, a collection of information unless it reasons discussed below, the serve as benchmarks to evaluate
displays a currently valid control Commission is granting approval of the efficiency and effectiveness, promote
number. proposed rule change. confidence among management and
Written comments are invited on: (a) II. Description of the Proposed Rule participants, and evaluate operational
Whether the proposed collection of Change performance against expectations. The
information is necessary for the proper Operational Risk Management
performance of the functions of the ICC is proposing to update and
Framework states ICC’s goals of
agency, including whether the formalize ICC’s Operational Risk
identifying, monitoring, and managing
information will have practical utility; Management Framework. According to
ICC, the Operational Risk Management all plausible sources of operational risk
(b) the accuracy of the agency’s estimate and establishing clear policies and
of the burden of the collection of Framework is designed to create a
program of risk assessment and procedures to address presented risk
information; (c) ways to enhance the scenarios. For example, the Operational
quality, utility, and clarity of the oversight to identify, monitor, and
manage plausible sources of operational Risk Management Framework
information collected; and (d) ways to incorporates ICC’s risk assessment
risk,5 and to timely manage and report
minimize the burden of the collection of methodology to identify and evaluate
operational performance measures. ICC
information on respondents, including
further states that the operational risk potential operational risks in each of its
through the use of automated collection
program is designed to evaluate and major clearing processes, as well as
techniques or other forms of information
mitigate operations risk presented to procedures for recommending controls
technology. Consideration will be given
ICC by its partners, related entities, and to mitigate risks identified in the risk
to comments and suggestions submitted
vendors. According to ICC, the assessment. The Operational Risk
in writing within 60 days of this
Operational Risk Management Management Framework also contains
publication.
Framework is overseen by the ICC information regarding how ICC
Please direct your written comments
Board, ICC department heads and the leverages certain shared infrastructures
to Pamela Dyson, Acting Director/Chief
Chief Compliance Officer, and internal within the Intercontinental Exchange,
Information Officer, Securities and
audit performs reviews of the Inc. family as part of its operational risk
Exchange Commission, C/O Remi
operational risk management processes. management program.
Pavlik-Simon, 100 F Street NE.,
Under the Operational Risk
Washington, DC 20549; or send an email Additionally, the Operational Risk
Management Framework, the
to: PRA_Mailbox@sec.gov. Management Framework details the
Operational Risk Manager has the
Dated: March 2, 2015. responsibility and authority to develop Operational Risk Manager’s
Brent J. Fields. and enforce, in consultation with the responsibilities in terms of business
Secretary. ICC Board and appropriate members of continuity planning, vendor risk
[FR Doc. 2015–05218 Filed 3–5–15; 8:45 am] senior management, the operational risk management, and the release of new
BILLING CODE 8011–01–P program, which applies to all ICC products, processes, and initiatives.
activities, groups, functions and Under the Operational Risk
locations. The Operational Risk Management Framework, the
SECURITIES AND EXCHANGE Management Framework further Operational Risk Manager is responsible
COMMISSION provides that the Operational Risk for operational risk reporting, which
Manager is the owner of the Operational includes reporting and addressing
[Release No. 34–74399; File No. SR–ICC–
Risk Management Framework significant operational risk weaknesses
2014–19]
or failures timely and appropriately
1 15 U.S.C. 78s(b)(1).
Self-Regulatory Organizations; ICE 2 17
(including escalation to the appropriate
CFR 240.19b–4.
Clear Credit LLC; Order Granting 3 Securities Exchange Act Release No. 34–73684
members of senior management and the
Approval of Proposed Rule Change To (Nov. 25, 2014), 79 FR 71495 (Dec. 2, 2014) (SR– ICC Audit Committee and the Board
Formalize the ICC Operational Risk ICC–2014–19). when necessary), and providing ongoing
mstockstill on DSK4VPTVN1PROD with NOTICES

Management Framework 4 Securities Exchange Act Release No. 34–74082
reporting to appropriate members of
(Jan. 16, 2015), 80 FR 3687 (Jan. 23, 2015) (SR–ICC–
March 2, 2015. 2014–19). senior management and periodic
5 ‘‘Operational risk’’ is defined in the ICC reporting to the ICC Board and the ICC
I. Introduction Operational Risk Management Framework as the Audit Committee on the operational risk
risk that deficiencies in information systems, program and significant control matters.
On November 18, 2014, ICE Clear internal processes, personnel, or disruptions from
Credit LLC (‘‘ICC’’) filed with the external events will result in the reduction,
Securities and Exchange Commission deterioration, or breakdown of services.

VerDate Sep<11>2014 18:59 Mar 05, 2015 Jkt 235001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\06MRN1.SGM 06MRN1
Federal Register / Vol. 80, No. 44 / Friday, March 6, 2015 / Notices 12225

III. Discussion and Commission expected to allow for timely recovery of SECURITIES AND EXCHANGE
Findings operations and fulfillment of ICC’s COMMISSION
Section 19(b)(2)(C) of the Act 6 directs obligations upon disruption. The
the Commission to approve a proposed Commission therefore believes that the [Release No. 34–74408; File No. SR–
rule change of a self-regulatory proposed rule change is reasonably NYSEMKT–2015–11]
organization if the Commission finds designed to identify sources of
that such proposed rule change is operational risk and minimize them Self-Regulatory Organizations; NYSE
consistent with the requirements of the through the development and MKT LLC; Notice of Filing and
Act and the rules and regulations implementation of appropriate systems, Immediate Effectiveness of Proposed
thereunder applicable to such self- controls, and procedures and have Rule Change Specifying in Exchange
regulatory organization. Section business continuity plans that allow for Rules the Exchange’s Use of Certain
17A(b)(3)(F) of the Act 7 requires, among timely recovery of operations and Data Feeds for Order Handling and
other things, that the rules of a clearing fulfillment of a clearing agency’s Execution, Order Routing, and
agency are designed to promote the obligations, consistent with the Regulatory Compliance
prompt and accurate clearance and requirements of Rule 17Ad–22(d)(4).10
settlement of securities transactions Accordingly, the Commission believes
March 2, 2015.
and, to the extent applicable, derivative Pursuant to section 19(b)(1) 1 of the
that the proposed rule change is
agreements, contracts, and transactions, Securities Exchange Act of 1934 (the
designed to promote the prompt and
to assure the safeguarding of securities ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
and funds which are in the custody or accurate settlement of securities and
derivatives transactions, consistent with notice is hereby given that, on February
control of the clearing agency or for
Section 17A(b)(3)(F) of the Act.11 24, 2015, NYSE MKT LLC (the
which it is responsible and, in general,
to protect investors and the public ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
IV. Conclusion the Securities and Exchange
interest. In addition, Rule 17Ad–
22(d)(4) 8 requires registered clearing On the basis of the foregoing, the Commission (the ‘‘Commission’’) the
agencies, among other things, to Commission finds that the proposal is proposed rule change as described in
establish, implement, maintain, and consistent with the requirements of the Items I and II below, which Items have
enforce written policies and procedures Act and in particular with the been prepared by the self-regulatory
reasonably designed to identify sources requirements of Section 17A of the organization. The Commission is
of operational risk and minimize them Act 12 and the rules and regulations publishing this notice to solicit
through the development and thereunder. comments on the proposed rule change
implementation of appropriate systems, from interested persons.
controls, and procedures and have IT IS THEREFORE ORDERED,
pursuant to Section 19(b)(2) of the I. Self-Regulatory Organization’s
business continuity plans that allow for
timely recovery of operations and Act,13 that the proposed rule change Statement of the Terms of Substance of
fulfillment of a clearing agency’s (File No. SR–ICC–2014–19) be, and the Proposed Rule Change
obligations. hereby is, approved.14
The Exchange proposes to specify in
The Commission finds that the For the Commission, by the Division of Exchange rules the Exchange’s use of
proposed rule change is consistent with Trading and Markets, pursuant to delegated certain data feeds for order handling
Section 17A of the Act 9 and the rules authority.15 and execution, order routing, and
thereunder applicable to ICC. ICC’s
Operational Risk Management Brent J. Fields, regulatory compliance. The text of the
Framework establishes clear policies Secretary. proposed rule change is available on the
and procedures to identify and evaluate [FR Doc. 2015–05155 Filed 3–5–15; 8:45 am] Exchange’s Web site at www.nyse.com,
potential operational risks in each of its at the principal office of the Exchange,
BILLING CODE 8011–01–P
major clearing processes, and to and at the Commission’s Public
recommend controls to mitigate Reference Room.
identified risks, each of which are II. Self-Regulatory Organization’s
reasonably designed to identify, Statement of the Purpose of, and
monitor, and manage of all plausible
Statutory Basis for, the Proposed Rule
sources of operational risk.
Change
Furthermore, the Operational Risk
Management Framework establishes In its filing with the Commission, the
clearly defined operational performance self-regulatory organization included
objectives that are expected to serve as statements concerning the purpose of,
benchmarks for evaluating operational and basis for, the proposed rule change
efficiency and effectiveness, and to and discussed any comments it received
evaluate operational performance on the proposed rule change. The text
measurements against such objectives,
of those statements may be examined at
each of which are expected to enhance
the places specified in Item IV below.
ICC’s ability to mitigate operational risk. 10 17 CFR 240.17Ad–22(d)(4).
mstockstill on DSK4VPTVN1PROD with NOTICES

Finally, the Operational Risk 11 15 U.S.C. 78q–1(b)(3)(F).
The Exchange has prepared summaries,
Management Framework incorporates a 12 15 U.S.C. 78q–1. set forth in sections A, B, and C below,
business continuity plan that is 13 15 U.S.C. 78s(b)(2). of the most significant parts of such
14 In approving the proposed rule change, the statements.
6 15 U.S.C. 78s(b)(2)(C). Commission considered the proposal’s impact on
7 15 U.S.C. 78q–1(b)(3)(F). efficiency, competition and capital formation. 15 1 15 U.S.C.78s(b)(1).
8 17 CFR 240.17Ad–22(d)(4). U.S.C. 78c(f). 2 15 U.S.C. 78a.
9 15 U.S.C. 78q–1. 15 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.

VerDate Sep<11>2014 18:59 Mar 05, 2015 Jkt 235001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\06MRN1.SGM 06MRN1
Document Created: 2018-02-21 09:33:17
Document Modified: 2018-02-21 09:33:17
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 12224